STATEMENT OF CONSTITUTIONAL AND LEGAL AUTHORITY

Article I of the U.S. Constitution grants Congress the power to appropriate funds from the Treasury, pay the
obligations of and raise revenue for the federal government, and publish statements and accounts of all financial
transactions.
By law, Congress is also obligated to write a budget representing its plan to carry out these transactions in the
forthcoming fiscal years. While the President is required to propose his administration’s budget requests for
Congress’s consideration, Congress alone is responsible for writing the laws that raise revenues, appropriate
funds, and prioritize taxpayer dollars within an overall federal budget.
The budget resolution is the only legislative vehicle that views government comprehensively. It provides the
framework for the consideration of other legislation. Ultimately, a budget is much more than a series of
numbers. It also serves as an expression of Congress’s principles, vision and philosophy of governing.
This Budget Resolution for Fiscal Year 2012 intends to recommit the nation fully to the timeless principles of
American government enshrined in the U.S. Constitution – liberty, limited government, and equality under the
rule of law. It seeks to guide policies by those principles, freeing the nation from the crushing burden of debt that
is now threatening its future.
This budget is submitted, as prescribed by law, to apply these principles, reflect this vision, and provide a
framework for the orderly execution of Congress’s constitutional duties for Fiscal Year 2012 and beyond.
House Budget Committee | April 5, 2011 3
SUMMARY OF THE FISCAL YEAR 2012 BUDGET RESOLUTION
Where the President has failed, House Republicans will lead. This budget helps spur job creation today,
stops spending money the government doesn’t have, and lifts the crushing burden of debt. This plan puts
the budget on the path to balance and the economy on the path to prosperity.
KEY FACTS
SPENDING
Cuts $6.2 trillion in government spending over the next decade compared to the President’s budget, and
$5.8 trillion relative to the current-policy baseline.
Eliminates hundreds of duplicative programs, reflects the ban on earmarks, and curbs corporate welfare
bringing non-security discretionary spending to below 2008 levels.
Brings government spending to below 20 percent of the economy, a sharp contrast to the President’s
budget, in which spending never falls below 23 percent of GDP over the next decade.
DEBT AND DEFICITS
Reduces deficits by $4.4 trillion compared to the President’s budget over the next decade.
Surpasses the President’s low benchmark of sustainability – which his own budget fails to meet –
by reaching primary balance in 2015.
Puts the budget on the path to balance and pays off the debt.
TAXES
Keeps taxes low so the economy can grow. Eliminates roughly $800 billion in tax increases imposed by
the President’s health care law. Prevents the $1.5 trillion tax increase called for in the President’s budget.
Calls for a simpler, less burdensome tax code for households and small businesses. Lowers tax rates for
individuals, businesses and families. Sets top rates for individuals and businesses at 25 percent. Improves
incentives for growth, savings, and investment.
GROWTH AND JOBS
Creates nearly 1 million new private-sector jobs next year, brings the unemployment rate down to 4
percent by 2015, and results in 2.5 million additional private-sector jobs in the last year of the decade.
Spurs economic growth, increasing real GDP by $1.5 trillion over the decade.
Unleashes prosperity and economic security, yielding $1.1 trillion in higher wages and an average $1,000
per year in higher income for each family.
KEY OBJECTIVES
ECONOMIC GROWTH AND JOB CREATION: Fosters a better environment for private-sector job creation
by lifting debt-fueled uncertainty and advancing pro-growth tax reforms.
SPENDING CUTS AND CONTROLS: Stops Washington from spending money it does not have on
government programs that do not work. Locks in spending cuts with spending controls.
REAL SECURITY: Fulfills the mission of health and retirement security for all Americans by making the
tough decisions necessary to save critical health and retirement programs.
PATIENT-CENTERED HEALTH CARE: Repeals and defunds the President’s health care law, advancing instead
common-sense solutions focused on lowering costs, expanding access and protecting the doctor-patient
relationship.
RESTORING AMERICA’S EXCEPTIONAL PROMISE: Tackles the existential threat posed by rapidly
growing government and debt, applying the nation’s timeless principles to this generation’s
greatest challenge. Ensures that the next generation inherits a stronger, more prosperous America.
House Budget Committee | April 5, 2011 4
KEY COMPONENTS
Efficient, Effective and Responsible Government
Prioritizing National Security: Reflects $178 billion in savings identified by Defense Secretary Robert
Gates, reinvesting $100 billion in higher military priorities and dedicating the rest to deficit reduction.
Streamlining Other Government Agencies:
Returns non-security discretionary spending to below 2008 levels.
Repeals the new health care law and moves toward patient-centered reform.
Reduces the bureaucracy’s reach by applying private-sector realities to the federal government’s
civilian workforce.
Targets hundreds of government programs that have outlived their usefulness.
Ending Corporate Welfare: Ends the taxpayer bailouts of failed financial institutions, reforms Fannie Mae
and Freddie Mac, and stops Washington from picking the winners and losers across sectors of the
economy.
Boosting American Energy Resources: Removes barriers to safe, responsible energy exploration in the
United States; unlocks American energy production to help lower costs, create jobs, and reduce
dependence on foreign fossil fuels.
Changing Washington’s Culture of Spending: Locks in savings with enforceable spending caps and budget-
process reforms, addressing not only what Washington spends, but also how tax dollars are spent.
Strengthening the Social Safety Net
Repairing a Broken Medicaid System: Ends an onerous, one-size-fits-all approach by converting the
federal share of Medicaid spending into a block grant that gives states the flexibility to tailor their
Medicaid programs to the specific needs of their residents.
Preparing the Workforce for a 21st Century Economy: Consolidates the complex maze of dozens of
overlapping job-training programs into more accessible, accountable career scholarships aimed at
empowering American workers to compete in the global economy.
Fulfilling the Mission of Health and Retirement Security
Saving Medicare: Protects those in and near retirement from any disruptions and offers future
beneficiaries the same kind of health-care options now enjoyed by members of Congress.
Advancing Social Security Solutions: Forces action by the President and both chambers of Congress to
ensure the solvency of this critical program.
Promoting Economic Growth and Job Creation
Individual Tax Reform: Simplifies the broken tax code, lowering rates and clearing out the burdensome
tangle of loopholes that distort economic activity; brings the top rate from 35 to 25 percent to promote
growth and job creation.
Corporate Tax Reform: Improves incentives for job creators to work, invest, and innovate in the United
States by lowering the corporate tax rate from 35 percent, which is the highest in the industrialized
world, to a more competitive 25 percent.
House Budget Committee | April 5, 2011 5
A CONTRAST IN BUDGETS
The Path to Prosperity President’s FY2012 Budget
Spending Cuts $6.2 trillion in spending cuts relative
to President’s budget; $5.8 trillion in
spending cuts relative to CBO’s
current-policy baseline
$400 billion in new spending
above CBO’s current-policy
baseline
Spending Levels Brings non-security discretionary
spending to below pre-stimulus, pre-
bailout levels
Locks in reckless spending spree
Taxes Stops all of President’s taxes; Reforms
the broken tax code
Imposes a $1.5 trillion tax
increase
Corporate Tax Lowers the corporate tax rate to 25
percent to promote job creation and
global competitiveness
Leaves in place the highest corporate
tax rate in the developed world,
driving jobs overseas
Size of Government Brings government down to below 20
percent of GDP by 2015;
15 percent of GDP in 2050
Spending as a percent of GDP never
drops below 23 percent; Commits to
the explosive growth of government
Deficit Brings deficits under $1 trillion in
FY2012; Reduces deficits $4.4 trillion
relative to President’s budget; Puts the
budget on a path to balance
$1.2 trillion deficit in FY2012 marks
the fourth straight deficit exceeding
the $1 trillion mark
Primary Balance Primary balance (spending – interest
payments = revenue) is reached in 2015
Never reaches primary balance –
failing to clear even the low bar the
administration set for itself
Debt Held by Public Reduces the debt by $4.7 trillion relative
to the President’s budget; Pays off the debt
over time
Adds $9.1 trillion to the debt over the
next decade; Accelerates a debt-fueled
economic crisis
Health Care Repeals the job-destroying health care law Accelerates the job-destroying health
care law
Jobs According to the Heritage Center for
Data Analysis, creates nearly 1 million new
private-sector jobs next year; Brings
unemployment rate down to 4 percent in
2015
Accelerates tax hikes, health care law,
debt and government spending –
policies that result in slower
economic growth and fewer American
jobs
House Budget Committee | April 5, 2011 6
House Budget Committee | April 5, 2011 7
CHOICE
!"
TWO FUTURES
House Budget Committee | April 5, 2011 8
INTRODUCTION
Americans face a monumental choice about the future of their country.
This budget resolution reflects that choice. It disavows the relentless government spending, taxing, and
borrowing that are leading America, right at this moment, toward a debt-fueled economic crisis and the
demise of America’s exceptional promise.
It chooses instead a path to prosperity – by limiting government to its core constitutional roles, keeping
America’s promises to seniors, and unleashing the genius of America’s workers, investors, and
entrepreneurs.
For too long, policymakers in Washington have traveled the path of least resistance – a path that has,
unsurprisingly, led the nation downhill. The empty promises made by Washington over the years have
resulted in economic hardships today and increasing pessimism about tomorrow.
Government at all levels is mired in debt. Mismanagement and overspending have left the nation on the
brink of bankruptcy. Only recently, millions of American families saw their dreams destroyed in a
financial disaster caused by misguided policies, perverse incentives, and irresponsible leadership. This
crisis squandered the nation’s savings and crippled its economy.
At a time when the free-market foundations of the American economy were in desperate need of
restoration and repair, the last Congress took actions that further undermined them. The President and
his party’s leaders embarked on a stimulus spending spree that added hundreds of billions of dollars to
the debt, yet failed to deliver on its promises to create jobs. Acute economic hardship was exploited to
enact unprecedented expansions of government power.
This did not sit well with the American people. Citizens stood up and demanded that their leaders
reacquaint themselves with America’s founding ideals of liberty, limited government, and equality under
the rule of law.
In recent years, both political parties have squandered the public’s trust. The American people ended a
unified Republican majority in 2006, just as they ended a unified Democratic majority last fall. Americans
reject leaders who focus on the pursuit of power at the expense of principle. They reject empty
promises from a government that cannot live within its means. They deserve the truth about the
nation’s fiscal and economic challenges. They deserve – and demand – honest leaders willing to stand
for solutions.
Congress can no longer afford to ignore these demands. Political parties lose elections, and life in the
republic goes on. But a government that loses its sovereignty to its bondholders cannot long guarantee
its people’s prosperity – or secure their freedom. A government that buries the next generation under
an avalanche of debt cannot claim the moral high ground in the world. A government that allows
economic destinies to be determined by political considerations rather than merit cannot lead the
world in productivity and growth. And a government that promotes dependency and undermines the
institutions of faith and family will inevitably weaken the nation’s greatest strength: the exceptional
character of its entrepreneurial, self-reliant, and hard-working citizens.
This budget, The Path to Prosperity, heeds America’s political, economic, and moral imperatives by
confronting the nation’s most urgent fiscal challenges.
This Path to Prosperity draws upon solutions from across the political spectrum and builds upon the
important work of the President’s bipartisan Commission on Fiscal Responsibility and Reform.
House Budget Committee | April 5, 2011 9
This Path to Prosperity reflects input from leaders at the state and local level, economists and experts
who have testified before the House Budget Committee, and American citizens calling for honest
leadership and real solutions.
This Path to Prosperity applies America’s timeless principles to today’s greatest challenges by committing
to three key goals: lifting the crushing burden of debt, fulfilling the mission of health and retirement
security for all Americans, and strengthening the foundations of economic growth and job creation.
Above all, this Path to Prosperity calls for a government faithful to its limited but noble mission: securing
every American’s right to pursue a destiny of his or her choosing. This budget rejects a culture of
complacency, offers reforms that promote initiative by rewarding effort, and aims to restore the
dynamism that has defined America over the generations.
In the words of Abraham Lincoln, “We cannot escape history. We of this Congress and this
Administration will be remembered in spite of ourselves.” Will this be remembered as the Congress
that did nothing as the nation slouched toward a preventable debt crisis and irreversible decline? Or
will it instead be remembered as the Congress that did the hard work of preventing that crisis – the
one that chose the path to prosperity?
Decline is antithetical to the American Idea. America is a nation conceived in liberty, dedicated to
equality, and defined by limitless opportunity. In all the chapters of human history, there has never been
anything quite like America. This budget’s goal is to keep it exceptional, and to preserve its promise for
the next generation.
House Budget Committee | April 5, 2011 10
COMPONENTS OF THE FEDERAL BUDGET
Before laying out a vision for the future of the country – for that is what a federal budget is – it is first necessary
to provide an honest assessment of the facts.
Understanding how the government spends the money it takes in by taxing and borrowing is the first step
toward the goal of reversing the tide of red ink and getting the economy growing again.
That understanding begins with the elements of the federal budget:
Annually Approved Spending
Discretionary spending –
funding debated and
approved annually by
Congress and the
President – accounted
for slightly less than 40
percent of all federal
spending in 2010. This
category includes
transportation, energy,
education, foreign aid,
and funding for most
government agencies.
Over half of this
category goes toward
national defense, but it is
important to put that
number into perspective.
Defense spending as a
share of the budget has
fallen from around 25
percent thirty years ago
to around 20 percent
today. Like all categories of government spending, defense spending should be executed with greater efficiency
and accountability. But responsible budgeting must never lose sight of the fact that the first responsibility of the
federal government is to provide for the defense of the nation.
The category in Figure 1 labeled “non-defense discretionary spending” is primarily devoted to funding other
government agencies. While American families have been tightening their belts, these agencies have been the
beneficiaries of a major spending spree over the last two years. Since January of 2009, there has been a 24
percent increase in this slice of the pie – a number that jumps to 84 percent when stimulus funds are included.
Of the many new laws that made up the recent spending spree, the 2009 stimulus law has gotten the most
attention, with considerable focus on the billions of dollars it wasted on dubious government projects as well as
the many promises it broke with respect to job creation and economic growth. But domestic government
agencies also received large increases in their base budgets – the Environmental Protection Agency (EPA), for
example, received a 36 percent budget increase in just two short years.
An inevitable consequence of the last Congress’s decision to ramp up spending so quickly was that billions of
Americans’ hard-earned tax dollars were squandered. The Government Accountability Office (GAO) – the non-
House Budget Committee | April 5, 2011 11
FIGURE 1
partisan agency that audits the government’s books – recently found between $100 billion to $200 billion in
duplication, overlap, and waste in federal spending.
1
Clearly, Congress must restore discipline to this category. Already this year, the House of Representatives voted
to return spending on domestic government agencies to their pre-stimulus levels, and the House continues to
push the Senate and the President to bring spending under control for the remainder of the current fiscal year.
The Path to Prosperity builds on these efforts to cut spending, ensuring government can efficiently and effectively
meet its proper responsibilities. But getting discretionary spending under control is only a first step toward fiscal
sustainability. The real drivers of the nation’s debt lie elsewhere.
Autopilot Spending
Programs that have “autopilot” spending authority under existing law make up the rest of the budget. Because
permanent law governs the funding levels of programs in this category, it is usually referred to as “mandatory
spending,” even though Congress can change the law at any time.
As illustrated in Figure 1, autopilot spending accounted for around 60 percent of all federal spending in 2010.
Congress does not regularly debate, annually appropriate or properly scrutinize this category of spending. If an
individual meets legal eligibility requirements for these government programs, he or she automatically receives –
or “is legally entitled” – to the benefit. This category includes food stamps, unemployment benefits, and farm
subsidies – programs that are frequently referred to as “entitlement programs.”
The three largest entitlement programs are Social Security, Medicare, and Medicaid. Congress created these
programs in the middle decades of the last century in response to a problem that has preoccupied American
lawmakers for over a century: How can government best preserve the freedom to risk and to dare, in pursuit of
dreams large and small, while providing a safety net for those citizens who meet with misfortune along the way?
For decades, seniors have been able to rely on Social Security and Medicare for their basic retirement needs,
while Medicaid has sought to ensure that low-income Americans would not go without essential health care. But
Americans will not be able to rely on these programs for much longer unless Congress repairs and reforms
them. Social Security, Medicare and Medicaid all face structural problems that are driving them – and the country
– into bankruptcy.
Unlike defense, the share of the budget that goes to these entitlement programs is growing rapidly. In 1970, these
major entitlements consumed about 30 percent of the budget – a number that has grown to over 40 percent
today (see Figure 1). Unless action is taken to reform these programs, they will continue to crowd out all other
national priorities until they break the federal budget.
Simply put, these programs were created with a 20
th
-century economy in mind. They were not designed for the
new demographic and economic challenges of the 21
st
century.
There are three key forces driving Social Security, Medicare and Medicaid into bankruptcy. All three are
interrelated, even though some of them affect one program more than the others.
Demographics
The first is demographic. This problem is most clearly seen in the financing for Social Security.
Social Security is financed through a pay-as-you-go system, which means that current workers’ Social Security
taxes are used to pay benefits for current retirees. In 1935 when Social Security was enacted, there were about
42 working-age Americans for each retiree. The average life expectancy for men in America was 60 years; for
House Budget Committee | April 5, 2011 12
1
Government Accountability Office. Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and
Enhance Revenue. March 2011. http://www.gao.gov/new.items/d11318sp.pdf
women it was 64. With these
demographics, it was easy for
the program to generate
sufficient revenue to meet its
promises to those over 65.
The demographic situation has
changed dramatically, however,
since the creation of the
program. In 1950, there were
3.5 million beneficiaries.
Currently, there are over 50
million beneficiaries – an over
fourteen-fold increase.
The explosion of payments in
the 75 years since the Social
Security system was enacted
will be dwarfed by the
demographic demands about to
come. The first members of the
baby-boom generation – those
born between 1946 and 1964 –
are already eligible for early
retirement. At the same time,
thanks to innovations in medical technology and health care, life expectancies have lengthened to an average of
75 years for men and 80 years for women, and are expected to grow further.
Not only is our nation aging, there has also been a demographic shift to a lower retirement age. In 1945, the
average age of retirement was 69.6 years. In 2009, it was 63.8 years.
To put this in perspective, when Social Security was first enacted in 1935, each worker, on average, was
contributing less than 2.5 percent of one retiree’s benefits. By 2030, each wage earner will be paying for nearly
half of each retired person’s full benefits.
This represents a massive shift of earnings away from younger families trying to build their futures, toward Social
Security recipients. No economy can grow and thrive under that heavy a tax burden.
Real reform – especially with respect to Social Security – must reflect demographic reality.
Economics
The second force is economic. For much of the last two years, Washington has been embroiled in a bruising
debate over a law that was supposed to provide a “comprehensive” solution to the nation’s health-care problems
by putting even more of the health sector under government control. Yet rapidly rising health-care costs remain
as big a problem as ever. In 2010, health-care costs rose by over 7 percent, compared to around 1 percent for all
other goods and services.
This is putting enormous pressure on Medicare and Medicaid. But these programs aren’t just affected by rapidly
rising health-care costs – they are actually a key driver of inflation in the health-care sector. Nearly 50 cents of
every dollar spent on health care in this country is spent by federal, state or local government. Because of the
design and structure of these programs, much of the government’s money gets wasted – and shows up as
inflation in the cost of care.
Everyone who is on Medicare or knows someone on Medicare has stories about waste in the system –
unnecessary tests, redundant treatments, and the cost in both time and money of mistaken billings and misplaced
House Budget Committee | April 5, 2011 13
FIGURE 2
records. This kind of waste is inevitable in a top-down, government-run system, and it’s a big reason that costs
have spiraled out of control.
Moreover, America’s health-care entitlements are currently set up as open-ended, blank-check commitments to
reimburse health-care providers for services – and this very structure raises costs and reduces efficiency. Blank-
check commitments create perverse incentives for everyone in the health-care system to maximize his or her
share of this apparently limitless government subsidy. This leads to waste and fraud on a massive scale.
Last year’s health-care law – with its maze of mandates, dictates, controls, tax hikes and subsidies – exacerbates
this flawed model and will push costs further in the wrong direction. Already, health insurance companies have
announced big premium hikes related to the law’s new mandates. Its so-called cost controls amount to the same
kind of fee-for-service reductions that have failed to control costs in Medicare for decades. (Providers predictably
increase the number of services provided for each condition as the government lowers fees). And it will
dramatically expand a Medicaid program that is already breaking state budgets and adding to a growing flood of
red ink at the federal level.
Real reform – especially with respect to Medicare – must eliminate this unsustainable waste and reduce
inefficiencies and costs by giving beneficiaries themselves more control over their own health-care benefits and
decisions.
Skewed political incentives
The third force, particularly with regard to Medicaid, boils down to a question of control. In this country, where
should power reside? Should it be centralized in the hands of federal bureaucrats, or decentralized across the
country at the state, local and individual level? The current incentive structure, with most of the power
concentrated at the federal level, drives the heedless expansion of these programs and therefore the growth of
health-care costs for all Americans.
As government increases subsidies and control over the price and delivery of health care, it saps the system of
innovation and efficiency, and it pushes quality health care out of reach for those who are not eligible for federal
programs. This results in more demands to increase federal subsidies and control. Any effort to propose
significant reforms to these programs triggers a barrage of demagoguery and entrenched resistance.
Skewed political incentives have proved especially damaging in the Medicaid program. Because the federal
government matches every state dollar spent on the program, states do not pay the full cost of expanding the
program. At the same time, every dollar in Medicaid expenditures cut from state budgets triggers more than a
dollar worth of cuts in federal funding. These incentives encourage states to expand the program beyond those
who are truly in need.
Worse, states are not given the flexibility to design their Medicaid programs in smart or efficient ways. When
even their smaller share of the tab becomes unaffordable, as has happened in many states, it is often the case that
their only option is to impose across-the-board reductions in reimbursements to doctors, which leave many
doctors unwilling to see Medicaid patients. As a result, these patients are left with fewer options and lower-
quality care. The new health care law, with its large expansions of Medicaid, will funnel more people into a broken
system.
Real reform – especially with respect to Medicaid – must give states the flexibility they need to better assist their
most vulnerable populations.
Empty promises
Policymakers have known about these problems for decades, but few have been willing to propose real solutions.
Figure 3 makes it very clear that, absent action, Social Security, Medicare and Medicaid will soon grow to
consume every dollar of revenue that the government raises in taxes. At that point, policymakers would be left
with no good options. Making do without any federal government departments, including the military, is not really
House Budget Committee | April 5, 2011 14
option at all, and neither is
raising taxes to a level that
no free and prospering
economy could sustain.
Of course, if Congress
continues to delay, it will
lose even the ability to
make such choices on its
own terms. The foreign
governments and
institutional lenders that
finance America’s debt
would cut up the nation’s
credit cards before things
got that far. That would
mean sudden, steep cuts in
entitlement benefits to
current seniors, less help
for the poor, and a
crushing tax burden on
young families.
Each year that Congress
fails to act, the U.S. government gets closer to breaking promises to current retirees while adding to a growing
pile of empty promises made to future generations. The government’s unfunded liabilities – promises the
government makes to current workers about their health and retirement security for which it has no means to
pay – are growing by trillions of dollars a year.
America has seen unfunded obligations much, much less severe than these take down some of its proudest
companies. In industries such as steel, aviation and autos, workers lost promised benefits when their employers
failed to take timely, responsible steps to update their unworkable, 20
th
-century benefit
structures. Many retirees lost the critical health and retirement benefits that they were
counting on.
Unless Congress acts,
Americans can expect the
same thing to happen to
Social Security and
Medicare. Under current
law, Social Security
benefits are scheduled to
be cut by 22 percent in
2037, when the Social
Security trust fund runs
out of assets and payroll
taxes are not sufficient to
cover benefits owed.
Medicare is on a similarly
unsustainable path – the
Medicare trend line
illustrated in Figure 3 is a
mathematical
impossibility. Future
benefit cuts – against a
backdrop of skyrocketing
House Budget Committee | April 5, 2011 15
FIGURE 3
FIGURE 4
costs – are a certainty if the program goes unreformed.
Americans have had enough instability in their lives, and they deserve a federal health and retirement safety net
that they can count on. If Congress wants to avoid defaulting on federal health and retirement programs, it must
adopt a program of gradual adjustment – one that frees the nation from the shadow of debt, strengthens its
health and retirement safety net, protects those in or near retirement from any disruptions in their benefits, and
supports robust economic growth and job creation.
Taxes
The U.S. government is not running sustained deficits because Americans are taxed too little. The government is
running deficits because it spends too much.
Over the past 40 years, government revenue has averaged between 18 percent and 19 percent of GDP. This level
has generally been compatible with prosperity, even though there is broad agreement that the structure of the tax
code should be simplified and made more conducive to economic growth, high wages and entrepreneurship.
Figure 5 shows that Washington has a spending problem, not a revenue problem. The President’s budget would
drive both spending and revenues to historic highs as a share of the total U.S. economy. The trend is clear:
Chasing ever-higher spending with ever-higher tax rates would leave the U.S. economy at a
severe disadvantage compared to the rest of the world, to say nothing of the pain felt by
American families deprived
of the chance to save for a
better future.
Nor can the government
solve this problem just by
raising the top individual tax
rates: Even if it were wise to
raise taxes on the most
successful small businesses
in America – most of which
are owned by individuals
and file at individual rates –
the government cannot
even come close to closing
the fiscal gap that way. To
close the fiscal gap by
raising the top rates, the
government would have to
collect an additional
$500,000 each year on
average from every taxpayer
in the top two brackets, on
top of what these taxpayers
already pay.
The non-partisan Congressional Budget Office has concluded that the tax rates needed to sustain the nation’s
current fiscal trajectory into the future would end up sinking the economy.
2
That is one reason that the
Commission on Fiscal Responsibility and Reform proposed, as part of an overall effort to fix the nation’s
unsustainable deficits, a fundamental tax reform plan that actually lowered income tax rates to promote growth,
while eliminating tax loopholes to broaden the tax base.
3

House Budget Committee | April 5, 2011 16
2
Congressional Budget Office. Letter to Congressman Paul D. Ryan. May 2008.
3
The National Commission on Fiscal Responsibility and Reform. The Moment of Truth. December 2010. http://
www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf
FIGURE 5
A broader base with lower rates is central to a fair, efficient and sustainable tax code, and the economic growth
spurred by such a reform is a precondition to fixing the nation’s fiscal mess.
Deficits and Debt
When the government spends more than it takes in through taxes, it has to borrow money to cover the
shortfall. The deficit is how much the nation has to borrow to fund the gap between spending and revenue in a
given year. The debt is the total amount outstanding that the government owes – it represents the accumulation
of deficits over time.
This year is projected to mark the third straight year in which the nation borrows over $1 trillion. The gross
debt is scheduled to hit $14 trillion, which is nearly the size of the entire U.S. economy. The President’s budget
would nearly double this debt over the next ten years, bringing it to $26 trillion. Clearly, Congress must address
this crisis now – before it is too late.
House Budget Committee | April 5, 2011 17
BURDEN OF DEBT
The United States is facing a
crushing burden of debt – a
debt that will soon surpass the
size of the entire U.S. economy
and ultimately capsize it if left
on its present course.
This is not the future of a
proud and prosperous nation. It
is the future of a nation in
decline – its best days come
and gone. Yet decline is not
inevitable. Congress has all the
fiscal powers necessary to
command a change of course.
But it must find the will to
change, and find it quickly, in
order to avoid this fate.
America’s unsustainable budget
path is no longer a problem
that is far off in the future. The
lenders who buy much of the
federal government’s debt have
noticed the disconnect between the government’s perilous fiscal situation and the low rates of interest it is
paying on the bonds that constitute the government’s loans. Some have even decided to purge their portfolios of
U.S. debt, and others are advising their clients to do the same.
4

Through its interventions into the economy, the Federal Reserve has recently become the largest buyer of
government debt in the country, and these purchases have helped keep interest rates low. But the Fed is
scheduled to stop making these purchases this summer. Congress must show the market that it has a credible
plan for getting the national debt under control, in order to ease concerns over the government’s credit-
worthiness and stave off an interest-rate spike.
This budget is offered in the hope that it might demonstrate the new House majority’s determination to face the
government’s most difficult fiscal challenges.
An Unsustainable Path
The recent sovereign debt crises in Greece and other highly-indebted European countries provide a cautionary
tale of the rough justice of the marketplace – lenders cannot and will not finance unsustainable deficits forever,
and when they cut up the credit cards of profligate countries, severe economic turmoil ensues.
Over the past few years, Americans have seen just how quickly a severe financial crisis can create widespread
pain and chaos. But the last crisis was foreseen only by a small number of perceptive individuals who recognized
the implications of unwise decisions being made in Washington and on Wall Street.
By contrast, nearly every fiscal expert and advisor in Washington has warned that a major debt crisis is inevitable
if the U.S. government remains on its current unsustainable path. The government’s failure to prevent this
completely preventable crisis would rank among history’s most infamous episodes of political malpractice.
House Budget Committee | April 5, 2011 18
4
“Pimco’s Biggest Fund Dumps Treasury Bond Holdings.” Reuters with CNBC.com, March 9, 2011 http://www.cnbc.com/id/
41990901/ (accessed March 31, 2011).
FIGURE 6
Erskine Bowles, the Democratic co-chairman of the Commission on Fiscal Responsibility and Reform, said it
best: “The era of deficit denial is over.”
5

Nearing a Debt Crisis
Like a household or business, a nation’s indebtedness is best understood in terms of how much it owes relative
to how much it makes. By that measure, debt held by the public – money that the U.S. government owes to
others – will reach nearly 70 percent of the entire U.S. economy this year.
If this were merely a temporary rise in the debt, it would not be so alarming. However, the spending spree of the
last two years, combined with the coming retirement of nearly 80 million baby boomers, threaten to turn these
recent deficit spikes into a permanent plunge into debt.
Debt in excess of 60 percent of the economy is not sustainable for an extended period of time. That is bad news
for the United States. According to the non-partisan CBO, the President’s budget would keep the debt climbing
as a share of the economy in the decade ahead, from nearly 70 percent this year to over 87 percent of the U.S.
economy by 2021. University of Maryland economist Carmen Reinhart testified before the Budget Committee
that 90 percent is often a trigger point for economic decline.
6

How a Debt Crisis Would Unfold
Spiraling interest rates
The first sign that a debt crisis has arrived is that bond investors lose confidence in a government’s ability to pay
its debts – and by that point, it is usually too late to avoid severe disruption and economic pain. Right now, the
U.S. government is able to borrow at historically low rates, partly because of the Fed’s interventions in the
market, but also because the bonds of most foreign countries are looking even riskier. Neither of these
conditions is going to last. Interest rates – and the burden of paying interest on the debt – have nowhere to go
but up.
Interest payments are already consuming around 10 cents of every tax dollar. But as interest rates rise from their
current historically low levels and debt continues to mount, interest payments are projected to consume over 20
percent of all tax revenue by 2020.
That means that one in five tax dollars will be dedicated to making interest payments by the end of the decade –
and that’s according to optimistic projections about interest rates. If interest rates increase by a higher-than-
expected amount in future – which appears to be more likely – then the nation’s interest payments could cost
trillions of dollars more.
Foreign flight
It would be one thing if the U.S. government owed most of this money to domestic lenders. But the nation’s
reliance on foreign creditors has increased dramatically over the past few decades. Foreigners now own roughly
half of all publicly held U.S. debt, a sharp increase from a generation ago when foreigners owned just 5 percent of
U.S. debt. This makes the nation vulnerable to a sudden shift in foreign investor sentiment, particularly during a
time of crisis.
If foreign investors, especially foreign governments such as China, begin to lose confidence in the U.S.
government’s ability to solve its most difficult fiscal challenges, they will demand higher compensation to offset
the perceived risk of holding U.S. debt – meaning sharply higher interest rates.
House Budget Committee | April 5, 2011 19
5
Wolf, Richard. “Are We Ready to Cut the U.S. Deficit?” USA TODAY, November 29, 2010 http://www.usatoday.com/
printedition/news/20101129/1adeficit29_cv.art.htm (accessed March 31, 2011).
6
Reinhart, Carmen M. Testimony before the U.S. House, Committee on the Budget. Lifting the Crushing Burden of Debt.
Hearing, March 10, 2011.
During the financial crisis,
foreigners flocked to
Treasury debt simply because
other investments looked so
unsafe by comparison, and
this helped keep interest
rates low. But these
investment flows work both
ways, as the heavily indebted
nations of Europe have
recently learned. If the
Congress continues to put
off difficult choices regarding
the nation’s long-term
problems, foreign investors
will re-evaluate the
creditworthiness of the
United States and demand
higher interest rates.
The Consequences of
Inaction
Stagflation
The economic effects of a debt crisis on the United States would be far worse than what the nation experienced
during the financial crisis of 2008. For starters, no entity on the planet is large enough to bail out the U.S.
government. Absent a bailout, the only solutions to a debt crisis would be truly painful: massive tax increases,
sudden and disruptive cuts to vital programs, runaway inflation, or all three. This would create a huge hole in the
economy that would be exacerbated by panic.
Even if high debt did not cause a crisis, however, the nation would still be in for a long and grinding period of
economic decline if it stays on its current path. A recent study completed by Reinhart and economist Ken Rogoff
of Harvard confirms this common-sense conclusion. The study found conclusive empirical evidence that total
debt exceeding 90 percent of the economy has a significant negative effect on economic growth.
7

The study looked specifically at the United States, focusing on growth and inflation relative to past periods when
this nation has experienced high debt levels. The study found that not only is average economic growth
dramatically lower when gross U.S. debt exceeds 90 percent of the economy, but inflation also becomes a
problem.
Essentially, the study confirmed that massive debts of the kind the nation is on track to accumulate are
associated with “stagflation” – a toxic mix of economic stagnation and rising inflation.
Real pain for families
Warning signs in financial markets would merely be a harbinger of the real economic pain that would eventually
be felt by American families in the event of a debt crisis.
Much higher interest rates on government debt would translate into much higher interest rates on mortgages,
credit cards and car loans. These higher rates would most likely come as a shock to most Americans, who have
grown accustomed to borrowing in a climate of historically-low interest rates. It might even shock those who
lived through the double-digit interest rates of the early 1980s.
House Budget Committee | April 5, 2011 20
7
Reinhart, Carmen M. and Kenneth S. Rogoff. “Growth in a Time of Debt.” January 2010. http://www.economics.harvard.edu/
files/faculty/51_Growth_in_Time_Debt.pdf
FIGURE 7
Despite the increase in saving rates that has occurred in the wake of the financial crisis, U.S. households are still
heavily indebted. The nation’s households still owe $13 trillion in private debt, or roughly 120 percent of their
total disposable income. A large chunk of that total debt consists of home mortgages, while the rest is in credit
cards and other forms of debt.
It turns out that roughly half of all that debt is in the form of variable interest rate loans, meaning that a sudden
increase in Treasury bond rates would lead to higher borrowing costs for consumers relatively quickly. According
to the current level and composition of U.S. household debt, estimates suggest that an interest rate increase of
just 1 percentage point would lead to over $400 in extra interest payments each year for the average family.
Given that a serious debt crisis could lead to a sharp increase in Treasury rates, the added interest costs for the
typical family could easily exceed $1,000 per year. As household borrowing costs spiked, growth in overall
consumer spending, which accounts for nearly 70 percent of the U.S. economy, would decline.
Real pain for businesses
Higher borrowing costs would also serve as a serious impediment for businesses. The rise in interest rates would
lead to lower business investment as companies would face a much higher hurdle for profitability on potential
expansion plans.
Businesses would be doubly squeezed because, as their funding costs were rising, demand for their products
(particularly consumer durables bought on credit like cars, home furnishings, etc.) would be slipping as consumer
spending tailed off. Add in higher taxes from a cash-strapped government trying to appease its creditors, and the
inevitable result would be less business expansion and higher unemployment.
Harsh austerity
As economic growth deteriorates, it becomes harder for the government to raise revenue through taxes, and a
vicious cycle ensues. If the nation ultimately experiences a panicked run on its debt, it will be forced to make
immediate and painful fiscal adjustments (like the austerity program that has provoked riots in Greece).
Facing the inability to borrow at a reasonable rate in the market, the government would have to slash spending
and raise taxes to narrow its large fiscal gap. In such a crisis, the Fed may also face rising pressure to step in and
“monetize” the government’s debt – essentially printing money to buy up the public debt that private investors
refuse to finance.
The consequences of these actions would be disastrous for the U.S. and the global economy. If the U.S.
government were forced to address such a situation by cutting domestic spending and raising taxes to close the
budget gap, it would be compelled to do so indiscriminately. Promises to current retirees would be broken, and
tax rates would be raised across-the-board, without regard for the economic consequences. Monetizing the
debt, meanwhile, would soon lead to a destabilizing inflation. This would wipe out the savings of millions of
Americans, hitting seniors the hardest. When combined with benefit cuts, this would mean punishing seniors
twice.
Financial system breakdown
The U.S. dollar is the world’s reserve currency, and U.S. Treasury bonds are the lynchpin of global debt markets,
considered to be safe and highly liquid assets by virtually all financial institutions worldwide. A U.S. debt crisis
would lead to sharp declines in the dollar and in the price of these bonds, causing a deterioration of the balance
sheets of large financial institutions. The resulting panic would be orders of magnitude more disruptive than the
financial crisis in 2008.
House Budget Committee | April 5, 2011 21
The Path to Decline
In the end, the debate about rising U.S. debt is not just about dollars and cents, but also about America’s status as
a world power and its freedom to act in its own best interests. If the nation stays on its current path, interest
payments on the national debt will begin to exceed yearly defense spending just 11 years from now. In just 16
years, yearly interest expenses will be double national defense spending.
If it stays on its current fiscal path, the United States will be unable to afford its role as an economic and military
superpower. Other nations with very different interests will rush in to fill that role.
Last year in Foreign Affairs magazine, financial historian Niall Ferguson surveyed some of the great empire declines
throughout history and observed that “most imperial falls are associated with fiscal crises. All the… cases were
marked by sharp imbalances between revenues and expenditures, as well as difficulties with financing public debt.
Alarm bells should be ringing loudly… [for] the United States.”
8

America must not lose its role in the world. For this and many other reasons, Congress must act now to change
the nation’s fiscal course. The new House majority was sent here by the American people to get spending under
control, keep taxes low, and confront these great challenges today to allow this generation to pass an even
greater nation along to the next generation.
Congress can choose to let this nation go the way of fallen empires, or it can begin – today – the work of
restoring the vitality and greatness of America.
House Budget Committee | April 5, 2011 22
8
Ferguson, Niall. “Complexity and Collapse: Empires on the Edge of Chaos.” Foreign Affairs, March/ April 2010.
A REFORM AGENDA FOR THE U.S. GOVERNMENT
When it comes to this generation’s defining challenge – the explosive growth of the national debt – the simple
truth is that Washington has not been honest with the American people.
The last Congress added trillions to the problem, and the current administration has offered no serious plan to
address the sea of red ink. There is a vacuum of leadership in Washington. This budget attempts to lead where
others have fallen short. To do otherwise would consign the United States to a diminished future – a future that
disrespects the sacrifices that generations of American families have made to secure the promise of this
exceptional nation.
This budget offers America a model of government guided by the timeless principles of the American Idea: free
market democracy, open competition, a robust private sector bound by rules of honesty and fairness, a secure
safety net, and equal opportunity for all under a limited constitutional government of popular consent.
In certain key respects, the federal government has strayed from these timeless principles. This budget offers a
set of fundamental reforms to put the nation back on the right track.
1. Reform government to make it more efficient, effective and responsible
The role of the federal government is both vital and limited. When government takes on too many tasks, it
usually doesn’t do any of them very well. Limited government also means effective government. This budget
recommits the federal government to the security of every American citizen’s natural right to life, liberty and the
pursuit of happiness, while fostering an environment for economic growth and private sector job creation.
Providing for the common defense: Recognizing that the first job of government is to secure the safety and liberty of
its citizens from threats at home and abroad, this budget rejects proposals to make deep, across-the-board cuts
in funding for national defense. Instead, it reflects the $178 billion in savings identified by Defense Secretary
Robert Gates, $100 billion of which would be reinvested in higher combat priorities. American men and women
in uniform are presently engaged with a fierce enemy and dealing with emerging threats around the world. This
budget achieves savings in the category of national defense without jeopardizing preparedness or critical missions.
Streamlining other government agencies: Government spending on domestic departments and agencies has grown
too much, too fast over the past decade, with much of the money going to programs and projects the nation can
do without. This budget starts to restore spending discipline to a government that badly needs it by returning
non-security discretionary spending to well below 2008 levels. It reduces the bureaucracy’s reach by applying
private-sector realities to the federal government’s civilian workforce. It targets hundreds of government
programs that have outlived their usefulness. It reflects an extension of the moratorium on earmarks. And it
repeals the government takeover of health care enacted last year and moves toward patient-centered reform.
Ending corporate welfare: There is a growing and pernicious trend of government overreach into sectors of the
private economy – a trend that stacks the deck in favor of entrenched interests and stifles growth. This budget
ends the taxpayer bailouts of failed financial institutions and stops Washington from picking the winners and
losers across sectors of the economy.
Boosting American energy resources: Too great a percentage of America’s vast natural resources remain locked
behind bureaucratic barriers and red tape. This budget removes moratoriums on safe, responsible energy
exploration in the United States, ends Washington policies that drive up gas prices, and unlocks American energy
production to help lower costs, create jobs, and reduce dependence on foreign oil.
Changing Washington’s culture of spending: The budget process in Washington contains numerous structural flaws
that bias the federal government toward ever-higher levels of spending. This budget locks in savings with
enforceable spending caps and budget process reforms, addressing not only what Washington spends, but also
how tax dollars are spent.
House Budget Committee | April 5, 2011 23
2. Reform welfare to strengthen the social safety net
This budget builds upon the historic progress of bipartisan welfare reform in the late 1990s. It strengthens
Medicaid, food stamps and job training programs by providing states with greater flexibility to help recipients
build self-sufficient futures for themselves and their families.
Repairing a broken Medicaid system: Medicaid’s flawed financing structure has created rapidly rising costs that are
nearly impossible to check. This budget ends an onerous, one-size-fits-all approach by converting the federal
share of Medicaid spending into a block grant that gives states the flexibility to tailor their Medicaid programs to
the needs of their unique populations.
Targeting assistance to those in need: The welfare reformers of the 1990s were not able to extend their work
beyond cash welfare to other means-tested programs. This budget extends those successes to other areas of the
safety net to ensure that America’s safety net does not become a hammock that lulls able-bodied citizens into
lives of complacency and dependency.
Preparing the workforce for a 21
st
century economy: The government’s dozens of job-training programs suffer from
overlapping responsibilities and too often lack accountability. The government must do a much better job of
leveraging and targeting existing resources in this policy area. This budget consolidates a complex maze of dozens
of job-training programs into more accessible, accountable career scholarships aimed at empowering American
workers with the resources they need to pursue their dreams.
3. Reform government programs to fulfill the mission of health and retirement security
This budget puts an end to empty promises from a broke government, offering instead real security through real
reforms. The framework established in this budget secures health and retirement benefit programs both for
current beneficiaries, who will receive the benefits they’ve organized their retirements around, and for future
generations, who will inherit stronger programs they can count on when they retire.
Saving Medicare: A flaw in Medicare’s structure is driving up health care costs, which are, in turn, threatening to
bankrupt the system – and ultimately the nation. This budget saves Medicare by fixing this flawed structure so
that the program will be there for future generations. These changes will not affect those in and near retirement
in any way. When younger workers become eligible for Medicare, they will be able to choose from a list of
guaranteed coverage options, enjoying the same kind of choices in their plans that members of Congress enjoy
today. Medicare would then provide a payment to subsidize the cost of the plan. In addition, Medicare will
provide increased assistance for lower-income beneficiaries and those with greater health risks. Reform that
empowers individuals — with a strengthened safety net for the poor and the sick — will guarantee that
Medicare can fulfill the promise of health security for America’s seniors.
Advancing Social Security solutions: The risk to Social Security, driven by demographic changes, is nearer at hand
than most acknowledge. This budget heads off a crisis by forcing action from the President and both chambers of
Congress to ensure the solvency of this critical program – creating the space for bipartisan solutions.
4. Reform the tax code to promote economic growth and job creation
This budget recognizes that the nation’s fiscal health requires a vibrant, growing private sector. It charts a
prosperous path forward by reforming a tax code that is overly complex and unfair.
Individual tax reform: The current code for individuals is too complicated, with high marginal rates that discourage
growth. This budget embraces the widely acknowledged principles of pro-growth tax reform by proposing to
consolidate tax brackets and lowers tax rates, with a top rate of 25 percent, clearing out the burdensome tangle
of loopholes that distort economic activity.
Corporate tax reform: American businesses labor under the highest corporate income tax in the developed world.
The perverse incentives created by the corporate income tax do a lot of damage, yet the tax itself raises
relatively little revenue. This budget improves incentives for job creators to work, invest, and innovate in the
United States by lowering the corporate rate from 35 percent to a much more competitive 25 percent.
House Budget Committee | April 5, 2011 24
The Choice
Throughout history, Americans have selflessly tackled the difficult challenges before the republic, whether civil
war, economic depression, or military threats from abroad.
From the beginning, our nation has been marked by hardship, yet defined by great courage and achievement in
monumental efforts.
Each generation has been tested, and each generation has found strength in America’s highest principles and
called forth its deepest virtues to make certain that the next generation inherited a stronger, more prosperous
and free America.
Today, the nation’s crushing burden of debt jeopardizes this legacy.
This generation must not be the first generation to fail – to break the link between our past, our present and
our future.
America is drawing perilously close to a tipping point that has the potential to curtail free enterprise, transform
its government, and weaken its national identity in ways that may not be reversible.
In this we face two dangers: long-term economic decline as the number of makers diminishes and the number of
takers grows and, worse, gradual moral-political decline as dependency and passivity weaken the nation’s
character and as the power to make decisions is stripped from individuals and their elected representatives and
given to non-elected bureaucracies.
The Path to Prosperity charts a different course.
This budget provides a plan for assuring that this generation upholds America’s historic legacy, rediscovers her
abiding principles, and charts a new path to prosperity.
It marks a new federal commitment, assuring this nation’s workers, investors, savers, and lenders that the new
House majority recognizes the threat that unlimited government poses to the American way of life, and that it is
determined to fulfill its commitments and responsibly restrain government’s growth.
Restoring limits to the size and scope of government is not a partisan issue. In his State of the Union Address on
January 4, 1935, President Franklin Roosevelt – in words later repeated by President Ronald Reagan – warned of
the threat to America’s national character from permanent dependency on government:
The lessons of history, confirmed by the evidence immediately before me, show conclusively that continued
dependence upon relief induces a spiritual and moral disintegration fundamentally destructive to the national
fiber. To dole out relief in this way is to administer a narcotic, a subtle destroyer of the human spirit… It is in
violation of the traditions of America.
Americans truly face a monumental choice – a choice that can no longer be avoided.
The Path to Prosperity is the groundwork for a serious conversation about the future of this exceptional nation.
While an important statement of priorities, a budget is merely a blueprint for the actual work of statecraft. The
elected representatives of the American people – in the House of Representatives, in the Senate and in the
White House – now must take up the tools and start building the future Americans deserve.
This generation’s defining moment has arrived.
House Budget Committee | April 5, 2011 25
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STATEMENT OF CONSTITUTIONAL AND LEGAL AUTHORITY
Article I of the U.S. Constitution grants Congress the power to appropriate funds from the Treasury, pay the obligations of and raise revenue for the federal government, and publish statements and accounts of all financial transactions. By law, Congress is also obligated to write a budget representing its plan to carry out these transactions in the forthcoming fiscal years. While the President is required to propose his administration’s budget requests for Congress’s consideration, Congress alone is responsible for writing the laws that raise revenues, appropriate funds, and prioritize taxpayer dollars within an overall federal budget. The budget resolution is the only legislative vehicle that views government comprehensively. It provides the framework for the consideration of other legislation. Ultimately, a budget is much more than a series of numbers. It also serves as an expression of Congress’s principles, vision and philosophy of governing. This Budget Resolution for Fiscal Year 2012 intends to recommit the nation fully to the timeless principles of American government enshrined in the U.S. Constitution – liberty, limited government, and equality under the rule of law. It seeks to guide policies by those principles, freeing the nation from the crushing burden of debt that is now threatening its future. This budget is submitted, as prescribed by law, to apply these principles, reflect this vision, and provide a framework for the orderly execution of Congress’s constitutional duties for Fiscal Year 2012 and beyond.

House Budget Committee | April 5, 2011

3

Ensures that the next generation inherits a stronger.5 trillion tax increase called for in the President’s budget. Prevents the $1. and curbs corporate welfare bringing non-security discretionary spending to below 2008 levels. House Republicans will lead.000 per year in higher income for each family. Spurs economic growth. Sets top rates for individuals and businesses at 25 percent. GROWTH AND JOBS Creates nearly 1 million new private-sector jobs next year. Unleashes prosperity and economic security. 2011 4 . Eliminates roughly $800 billion in tax increases imposed by the President’s health care law. savings. KEY FACTS SPENDING Cuts $6. KEY OBJECTIVES ECONOMIC GROWTH AND JOB CREATION: Fosters a better environment for private-sector job creation by lifting debt-fueled uncertainty and advancing pro-growth tax reforms. expanding access and protecting the doctor-patient relationship. reflects the ban on earmarks. DEBT AND DEFICITS Reduces deficits by $4.This budget helps spur job creation today. yielding $1. PATIENT-CENTERED HEALTH CARE: Repeals and defunds the President’s health care law.5 trillion over the decade. REAL SECURITY: Fulfills the mission of health and retirement security for all Americans by making the tough decisions necessary to save critical health and retirement programs. Brings government spending to below 20 percent of the economy.1 trillion in higher wages and an average $1. Improves incentives for growth. Surpasses the President’s low benchmark of sustainability – which his own budget fails to meet – by reaching primary balance in 2015. Eliminates hundreds of duplicative programs. and investment. more prosperous America. Puts the budget on the path to balance and pays off the debt.SUMMARY OF THE FISCAL YEAR 2012 BUDGET RESOLUTION Where the President has failed. Calls for a simpler. SPENDING CUTS AND CONTROLS: Stops Washington from spending money it does not have on government programs that do not work. advancing instead common-sense solutions focused on lowering costs. businesses and families. stops spending money the government doesn’t have. and results in 2. increasing real GDP by $1. Locks in spending cuts with spending controls. applying the nation’s timeless principles to this generation’s greatest challenge. RESTORING AMERICA’S EXCEPTIONAL PROMISE: Tackles the existential threat posed by rapidly growing government and debt. TAXES Keeps taxes low so the economy can grow. a sharp contrast to the President’s budget. brings the unemployment rate down to 4 percent by 2015.5 million additional private-sector jobs in the last year of the decade.8 trillion relative to the current-policy baseline. House Budget Committee | April 5. and lifts the crushing burden of debt.2 trillion in government spending over the next decade compared to the President’s budget. and $5.This plan puts the budget on the path to balance and the economy on the path to prosperity. in which spending never falls below 23 percent of GDP over the next decade. Lowers tax rates for individuals. less burdensome tax code for households and small businesses.4 trillion compared to the President’s budget over the next decade.

responsible energy exploration in the United States. and reduce dependence on foreign fossil fuels. invest. to a more competitive 25 percent. Boosting American Energy Resources: Removes barriers to safe. Effective and Responsible Government Prioritizing National Security: Reflects $178 billion in savings identified by Defense Secretary Robert Gates. 2011 5 .KEY COMPONENTS Efficient. brings the top rate from 35 to 25 percent to promote growth and job creation. unlocks American energy production to help lower costs. Advancing Social Security Solutions: Forces action by the President and both chambers of Congress to ensure the solvency of this critical program. lowering rates and clearing out the burdensome tangle of loopholes that distort economic activity. Strengthening the Social Safety Net Repairing a Broken Medicaid System: Ends an onerous. Promoting Economic Growth and Job Creation Individual Tax Reform: Simplifies the broken tax code. Streamlining Other Government Agencies: Returns non-security discretionary spending to below 2008 levels. addressing not only what Washington spends. and innovate in the United States by lowering the corporate tax rate from 35 percent. reforms Fannie Mae and Freddie Mac. create jobs. Repeals the new health care law and moves toward patient-centered reform. House Budget Committee | April 5. but also how tax dollars are spent. Targets hundreds of government programs that have outlived their usefulness. Ending Corporate Welfare: Ends the taxpayer bailouts of failed financial institutions. Fulfilling the Mission of Health and Retirement Security Saving Medicare: Protects those in and near retirement from any disruptions and offers future beneficiaries the same kind of health-care options now enjoyed by members of Congress. Corporate Tax Reform: Improves incentives for job creators to work. Reduces the bureaucracy’s reach by applying private-sector realities to the federal government’s civilian workforce. and stops Washington from picking the winners and losers across sectors of the economy. which is the highest in the industrialized world. Changing Washington’s Culture of Spending: Locks in savings with enforceable spending caps and budgetprocess reforms. reinvesting $100 billion in higher military priorities and dedicating the rest to deficit reduction. Preparing the Workforce for a 21st Century Economy: Consolidates the complex maze of dozens of overlapping job-training programs into more accessible. accountable career scholarships aimed at empowering American workers to compete in the global economy. one-size-fits-all approach by converting the federal share of Medicaid spending into a block grant that gives states the flexibility to tailor their Medicaid programs to the specific needs of their residents.

5 trillion tax increase Leaves in place the highest corporate tax rate in the developed world.A CONTRAST IN BUDGETS The Path to Prosperity Spending Cuts $6. Pays off the debt next decade.1 trillion to the debt over the to the President’s budget. Reduces deficits $4. Data Analysis.2 trillion deficit in FY2012 marks the fourth straight deficit exceeding the $1 trillion mark Never reaches primary balance – failing to clear even the low bar the administration set for itself Size of Government Deficit Primary Balance Debt Held by Public Reduces the debt by $4. prebailout levels Stops all of President’s taxes. $5.4 trillion relative to President’s budget.7 trillion relative Adds $9. Puts the budget on a path to balance Primary balance (spending – interest payments = revenue) is reached in 2015 President’s FY2012 Budget $400 billion in new spending above CBO’s current-policy baseline Locks in reckless spending spree Spending Levels Taxes Corporate Tax Imposes a $1.2 trillion in spending cuts relative to President’s budget. 2011 6 . creates nearly 1 million new debt and government spending – private-sector jobs next year.8 trillion in spending cuts relative to CBO’s current-policy baseline Brings non-security discretionary spending to below pre-stimulus. driving jobs overseas Spending as a percent of GDP never drops below 23 percent. Reforms the broken tax code Lowers the corporate tax rate to 25 percent to promote job creation and global competitiveness Brings government down to below 20 percent of GDP by 2015. Brings policies that result in slower unemployment rate down to 4 percent in economic growth and fewer American 2015 jobs Health Care Jobs House Budget Committee | April 5. Accelerates a debt-fueled over time economic crisis Repeals the job-destroying health care law Accelerates the job-destroying health care law According to the Heritage Center for Accelerates tax hikes. 15 percent of GDP in 2050 Brings deficits under $1 trillion in FY2012. Commits to the explosive growth of government $1. health care law.

House Budget Committee | April 5. 2011 7 .

CHOICE OF TWO FUTURES House Budget Committee | April 5. 2011 8 .

yet failed to deliver on its promises to create jobs. At a time when the free-market foundations of the American economy were in desperate need of restoration and repair. A government that buries the next generation under an avalanche of debt cannot claim the moral high ground in the world.INTRODUCTION Americans face a monumental choice about the future of their country. and irresponsible leadership. Acute economic hardship was exploited to enact unprecedented expansions of government power. Citizens stood up and demanded that their leaders reacquaint themselves with America’s founding ideals of liberty. unsurprisingly. Mismanagement and overspending have left the nation on the brink of bankruptcy. In recent years. just as they ended a unified Democratic majority last fall. self-reliant. It disavows the relentless government spending. This budget resolution reflects that choice. heeds America’s political. investors. and unleashing the genius of America’s workers. They reject empty promises from a government that cannot live within its means. toward a debt-fueled economic crisis and the demise of America’s exceptional promise. 2011 9 . This did not sit well with the American people. Government at all levels is mired in debt. The American people ended a unified Republican majority in 2006. Only recently. taxing. Americans reject leaders who focus on the pursuit of power at the expense of principle. This crisis squandered the nation’s savings and crippled its economy. They deserve – and demand – honest leaders willing to stand for solutions. This budget. House Budget Committee | April 5. right at this moment. They deserve the truth about the nation’s fiscal and economic challenges. and hard-working citizens. and equality under the rule of law. and life in the republic goes on. For too long. policymakers in Washington have traveled the path of least resistance – a path that has. It chooses instead a path to prosperity – by limiting government to its core constitutional roles. and borrowing that are leading America. This Path to Prosperity draws upon solutions from across the political spectrum and builds upon the important work of the President’s bipartisan Commission on Fiscal Responsibility and Reform. Congress can no longer afford to ignore these demands. both political parties have squandered the public’s trust. millions of American families saw their dreams destroyed in a financial disaster caused by misguided policies. and moral imperatives by confronting the nation’s most urgent fiscal challenges. keeping America’s promises to seniors. economic. The President and his party’s leaders embarked on a stimulus spending spree that added hundreds of billions of dollars to the debt. limited government. And a government that promotes dependency and undermines the institutions of faith and family will inevitably weaken the nation’s greatest strength: the exceptional character of its entrepreneurial. the last Congress took actions that further undermined them. The Path to Prosperity. perverse incentives. and entrepreneurs. Political parties lose elections. The empty promises made by Washington over the years have resulted in economic hardships today and increasing pessimism about tomorrow. But a government that loses its sovereignty to its bondholders cannot long guarantee its people’s prosperity – or secure their freedom. A government that allows economic destinies to be determined by political considerations rather than merit cannot lead the world in productivity and growth. led the nation downhill.

In the words of Abraham Lincoln. This budget’s goal is to keep it exceptional. and American citizens calling for honest leadership and real solutions. America is a nation conceived in liberty. dedicated to equality. there has never been anything quite like America. economists and experts who have testified before the House Budget Committee. and strengthening the foundations of economic growth and job creation. Above all. and aims to restore the dynamism that has defined America over the generations. offers reforms that promote initiative by rewarding effort. In all the chapters of human history. this Path to Prosperity calls for a government faithful to its limited but noble mission: securing every American’s right to pursue a destiny of his or her choosing. This Path to Prosperity applies America’s timeless principles to today’s greatest challenges by committing to three key goals: lifting the crushing burden of debt. This budget rejects a culture of complacency. “We cannot escape history. fulfilling the mission of health and retirement security for all Americans. We of this Congress and this Administration will be remembered in spite of ourselves. and to preserve its promise for the next generation. 2011 10 .” Will this be remembered as the Congress that did nothing as the nation slouched toward a preventable debt crisis and irreversible decline? Or will it instead be remembered as the Congress that did the hard work of preventing that crisis – the one that chose the path to prosperity? Decline is antithetical to the American Idea. House Budget Committee | April 5. and defined by limitless opportunity.This Path to Prosperity reflects input from leaders at the state and local level.

with considerable focus on the billions of dollars it wasted on dubious government projects as well as the many promises it broke with respect to job creation and economic growth. Of the many new laws that made up the recent spending spree. FIGURE 1 Over half of this category goes toward national defense. education. Since January of 2009. The category in Figure 1 labeled “non-defense discretionary spending” is primarily devoted to funding other government agencies. Like all categories of government spending. 2011 11 . defense spending should be executed with greater efficiency and accountability. there has been a 24 percent increase in this slice of the pie – a number that jumps to 84 percent when stimulus funds are included. the 2009 stimulus law has gotten the most attention. The Government Accountability Office (GAO) – the nonHouse Budget Committee | April 5. Defense spending as a share of the budget has fallen from around 25 percent thirty years ago to around 20 percent today. for example. energy. received a 36 percent budget increase in just two short years. foreign aid. While American families have been tightening their belts. That understanding begins with the elements of the federal budget: Annually Approved Spending Discretionary spending – funding debated and approved annually by Congress and the President – accounted for slightly less than 40 percent of all federal spending in 2010.COMPONENTS OF THE FEDERAL BUDGET Before laying out a vision for the future of the country – for that is what a federal budget is – it is first necessary to provide an honest assessment of the facts. But domestic government agencies also received large increases in their base budgets – the Environmental Protection Agency (EPA). these agencies have been the beneficiaries of a major spending spree over the last two years. This category includes transportation. but it is important to put that number into perspective. Understanding how the government spends the money it takes in by taxing and borrowing is the first step toward the goal of reversing the tide of red ink and getting the economy growing again. and funding for most government agencies. An inevitable consequence of the last Congress’s decision to ramp up spending so quickly was that billions of Americans’ hard-earned tax dollars were squandered. But responsible budgeting must never lose sight of the fact that the first responsibility of the federal government is to provide for the defense of the nation.

Congress created these programs in the middle decades of the last century in response to a problem that has preoccupied American lawmakers for over a century: How can government best preserve the freedom to risk and to dare. In 1970. even though some of them affect one program more than the others. The average life expectancy for men in America was 60 years. and the House continues to push the Senate and the President to bring spending under control for the remainder of the current fiscal year. these major entitlements consumed about 30 percent of the budget – a number that has grown to over 40 percent today (see Figure 1). As illustrated in Figure 1. http://www. If an individual meets legal eligibility requirements for these government programs. these programs were created with a 20th-century economy in mind.gao. and Enhance Revenue. while providing a safety net for those citizens who meet with misfortune along the way? For decades. Demographics The first is demographic. while Medicaid has sought to ensure that low-income Americans would not go without essential health care.1 Clearly. Medicare and Medicaid all face structural problems that are driving them – and the country – into bankruptcy. and farm subsidies – programs that are frequently referred to as “entitlement programs. Medicare. overlap. All three are interrelated. But getting discretionary spending under control is only a first step toward fiscal sustainability. Congress does not regularly debate. Congress must restore discipline to this category. Unless action is taken to reform these programs. But Americans will not be able to rely on these programs for much longer unless Congress repairs and reforms them. In 1935 when Social Security was enacted. Unlike defense.pdf House Budget Committee | April 5. unemployment benefits. Autopilot Spending Programs that have “autopilot” spending authority under existing law make up the rest of the budget.partisan agency that audits the government’s books – recently found between $100 billion to $200 billion in duplication. Social Security. This problem is most clearly seen in the financing for Social Security. Opportunities to Reduce Potential Duplication in Government Programs. ensuring government can efficiently and effectively meet its proper responsibilities. This category includes food stamps. annually appropriate or properly scrutinize this category of spending. Social Security is financed through a pay-as-you-go system. the share of the budget that goes to these entitlement programs is growing rapidly. Because permanent law governs the funding levels of programs in this category.” even though Congress can change the law at any time. seniors have been able to rely on Social Security and Medicare for their basic retirement needs. March 2011. in pursuit of dreams large and small. he or she automatically receives – or “is legally entitled” – to the benefit. there were about 42 working-age Americans for each retiree. Medicare and Medicaid into bankruptcy. Simply put. They were not designed for the new demographic and economic challenges of the 21st century. The Path to Prosperity builds on these efforts to cut spending. 2011 12 1 . Already this year.” The three largest entitlement programs are Social Security.items/d11318sp. for Government Accountability Office. the House of Representatives voted to return spending on domestic government agencies to their pre-stimulus levels. The real drivers of the nation’s debt lie elsewhere. Save Tax Dollars. and waste in federal spending. it is usually referred to as “mandatory spending.gov/new. and Medicaid. they will continue to crowd out all other national priorities until they break the federal budget. autopilot spending accounted for around 60 percent of all federal spending in 2010. There are three key forces driving Social Security. which means that current workers’ Social Security taxes are used to pay benefits for current retirees.

FIGURE 2 The explosion of payments in the 75 years since the Social Security system was enacted will be dwarfed by the demographic demands about to come. there has also been a demographic shift to a lower retirement age. however.women it was 64. Not only is our nation aging. redundant treatments. was contributing less than 2. there were 3. life expectancies have lengthened to an average of 75 years for men and 80 years for women. toward Social Security recipients. In 1950. In 1945. This is putting enormous pressure on Medicare and Medicaid. Because of the design and structure of these programs. state or local government. At the same time.8 years. By 2030. The first members of the baby-boom generation – those born between 1946 and 1964 – are already eligible for early retirement. there are over 50 million beneficiaries – an over fourteen-fold increase.5 million beneficiaries. Economics The second force is economic. health-care costs rose by over 7 percent.Yet rapidly rising health-care costs remain as big a problem as ever. Currently. To put this in perspective. Real reform – especially with respect to Social Security – must reflect demographic reality. In 2010. much of the government’s money gets wasted – and shows up as inflation in the cost of care. With these demographics. Washington has been embroiled in a bruising debate over a law that was supposed to provide a “comprehensive” solution to the nation’s health-care problems by putting even more of the health sector under government control. In 2009. each wage earner will be paying for nearly half of each retired person’s full benefits. thanks to innovations in medical technology and health care. 2011 13 . No economy can grow and thrive under that heavy a tax burden.5 percent of one retiree’s benefits. it was 63. The demographic situation has changed dramatically. This represents a massive shift of earnings away from younger families trying to build their futures. each worker. Everyone who is on Medicare or knows someone on Medicare has stories about waste in the system – unnecessary tests.6 years. the average age of retirement was 69. it was easy for the program to generate sufficient revenue to meet its promises to those over 65. on average. and are expected to grow further. when Social Security was first enacted in 1935. But these programs aren’t just affected by rapidly rising health-care costs – they are actually a key driver of inflation in the health-care sector. Nearly 50 cents of every dollar spent on health care in this country is spent by federal. compared to around 1 percent for all other goods and services. since the creation of the program. and the cost in both time and money of mistaken billings and misplaced House Budget Committee | April 5. For much of the last two years.

Worse. or decentralized across the country at the state. Medicare and Medicaid will soon grow to consume every dollar of revenue that the government raises in taxes. states do not pay the full cost of expanding the program. This results in more demands to increase federal subsidies and control. Its so-called cost controls amount to the same kind of fee-for-service reductions that have failed to control costs in Medicare for decades. health insurance companies have announced big premium hikes related to the law’s new mandates. policymakers would be left with no good options. 2011 14 . Skewed political incentives The third force. absent action. This kind of waste is inevitable in a top-down. Blankcheck commitments create perverse incentives for everyone in the health-care system to maximize his or her share of this apparently limitless government subsidy. Making do without any federal government departments. controls. Because the federal government matches every state dollar spent on the program. these patients are left with fewer options and lowerquality care. will funnel more people into a broken system. Social Security. which leave many doctors unwilling to see Medicaid patients. (Providers predictably increase the number of services provided for each condition as the government lowers fees). drives the heedless expansion of these programs and therefore the growth of health-care costs for all Americans. At that point. As government increases subsidies and control over the price and delivery of health care. and it pushes quality health care out of reach for those who are not eligible for federal programs. as has happened in many states. tax hikes and subsidies – exacerbates this flawed model and will push costs further in the wrong direction. Skewed political incentives have proved especially damaging in the Medicaid program. At the same time. every dollar in Medicaid expenditures cut from state budgets triggers more than a dollar worth of cuts in federal funding. Any effort to propose significant reforms to these programs triggers a barrage of demagoguery and entrenched resistance. Moreover. As a result. local and individual level? The current incentive structure. is not really House Budget Committee | April 5. dictates. In this country. blank-check commitments to reimburse health-care providers for services – and this very structure raises costs and reduces efficiency. it saps the system of innovation and efficiency. it is often the case that their only option is to impose across-the-board reductions in reimbursements to doctors. boils down to a question of control. And it will dramatically expand a Medicaid program that is already breaking state budgets and adding to a growing flood of red ink at the federal level. Real reform – especially with respect to Medicaid – must give states the flexibility they need to better assist their most vulnerable populations. with most of the power concentrated at the federal level. Already. The new health care law. government-run system. with its large expansions of Medicaid. including the military. These incentives encourage states to expand the program beyond those who are truly in need. states are not given the flexibility to design their Medicaid programs in smart or efficient ways. but few have been willing to propose real solutions. where should power reside? Should it be centralized in the hands of federal bureaucrats. America’s health-care entitlements are currently set up as open-ended. Empty promises Policymakers have known about these problems for decades. and it’s a big reason that costs have spiraled out of control. Real reform – especially with respect to Medicare – must eliminate this unsustainable waste and reduce inefficiencies and costs by giving beneficiaries themselves more control over their own health-care benefits and decisions. Figure 3 makes it very clear that. particularly with regard to Medicaid. Last year’s health-care law – with its maze of mandates.records. When even their smaller share of the tab becomes unaffordable. This leads to waste and fraud on a massive scale.

The government’s unfunded liabilities – promises the government makes to current workers about their health and retirement security for which it has no means to pay – are growing by trillions of dollars a year. That would mean sudden. it will lose even the ability to make such choices on its own terms. if Congress continues to delay. Future benefit cuts – against a backdrop of skyrocketing House Budget Committee | April 5. 2011 15 . steep cuts in entitlement benefits to current seniors. Americans can expect the same thing to happen to Social Security and Medicare. workers lost promised benefits when their employers failed to take timely. The foreign governments and institutional lenders that finance America’s debt would cut up the nation’s credit cards before things got that far. government gets closer to breaking promises to current retirees while adding to a growing pile of empty promises made to future generations. Medicare is on a similarly unsustainable path – the Medicare trend line illustrated in Figure 3 is a mathematical impossibility. America has seen unfunded obligations much. and neither is raising taxes to a level that no free and prospering economy could sustain.S. Under current law. Of course. the U. when the Social Security trust fund runs out of assets and payroll taxes are not sufficient to cover benefits owed. and a crushing tax burden on young families. much less severe than these take down some of its proudest companies. In industries such as steel. responsible steps to update their unworkable. Each year that Congress fails to act. aviation and autos. Unless Congress acts. 20th-century benefit structures.FIGURE 3 option at all. less help for the poor. Social Security benefits are scheduled to be cut by 22 percent in 2037. Many retirees lost the critical health and retirement benefits that they were FIGURE 4 counting on.

protects those in or near retirement from any disruptions in their benefits. to say nothing of the pain felt by FIGURE 5 American families deprived of the chance to save for a better future.costs – are a certainty if the program goes unreformed. If Congress wants to avoid defaulting on federal health and retirement programs.3 2 Congressional Budget Office. Letter to Congressman Paul D. strengthens its health and retirement safety net.gov/sites/fiscalcommission. The non-partisan Congressional Budget Office has concluded that the tax rates needed to sustain the nation’s current fiscal trajectory into the future would end up sinking the economy.S. Figure 5 shows that Washington has a spending problem. Americans have had enough instability in their lives. 2011 16 . May 2008. The government is running deficits because it spends too much. it must adopt a program of gradual adjustment – one that frees the nation from the shadow of debt.gov/files/documents/TheMomentofTruth12_1_2010.fiscalcommission.S. government is not running sustained deficits because Americans are taxed too little. on top of what these taxpayers already pay. high wages and entrepreneurship.2 That is one reason that the Commission on Fiscal Responsibility and Reform proposed. Taxes The U. economy. 3 The National Commission on Fiscal Responsibility and Reform. not a revenue problem. The trend is clear: Chasing ever-higher spending with ever-higher tax rates would leave the U. http:// www. The President’s budget would drive both spending and revenues to historic highs as a share of the total U. The Moment of Truth. Nor can the government solve this problem just by raising the top individual tax rates: Even if it were wise to raise taxes on the most successful small businesses in America – most of which are owned by individuals and file at individual rates – the government cannot even come close to closing the fiscal gap that way. as part of an overall effort to fix the nation’s unsustainable deficits. a fundamental tax reform plan that actually lowered income tax rates to promote growth.000 each year on average from every taxpayer in the top two brackets. the government would have to collect an additional $500.S. This level has generally been compatible with prosperity.pdf House Budget Committee | April 5. and they deserve a federal health and retirement safety net that they can count on. while eliminating tax loopholes to broaden the tax base. economy at a severe disadvantage compared to the rest of the world. and supports robust economic growth and job creation. December 2010. Ryan. government revenue has averaged between 18 percent and 19 percent of GDP. To close the fiscal gap by raising the top rates. Over the past 40 years. even though there is broad agreement that the structure of the tax code should be simplified and made more conducive to economic growth.

The deficit is how much the nation has to borrow to fund the gap between spending and revenue in a given year.A broader base with lower rates is central to a fair. The President’s budget would nearly double this debt over the next ten years. efficient and sustainable tax code.S. it has to borrow money to cover the shortfall. and the economic growth spurred by such a reform is a precondition to fixing the nation’s fiscal mess. which is nearly the size of the entire U. Clearly. House Budget Committee | April 5. economy. 2011 17 . Congress must address this crisis now – before it is too late. Deficits and Debt When the government spends more than it takes in through taxes. The gross debt is scheduled to hit $14 trillion. This year is projected to mark the third straight year in which the nation borrows over $1 trillion. The debt is the total amount outstanding that the government owes – it represents the accumulation of deficits over time. bringing it to $26 trillion.

in order to avoid this fate. But the last crisis was foreseen only by a small number of perceptive individuals who recognized the implications of unwise decisions being made in Washington and on Wall Street. 2011 http://www. the Federal Reserve has recently become the largest buyer of government debt in the country.S. But the Fed is scheduled to stop making these purchases this summer. economy and ultimately capsize it if left on its present course.” Reuters with CNBC.cnbc. The government’s failure to prevent this completely preventable crisis would rank among history’s most infamous episodes of political malpractice. government remains on its current unsustainable path. It is the future of a nation in decline – its best days come and gone. Over the past few years. This is not the future of a proud and prosperous nation. March 9. debt.BURDEN OF DEBT The United States is facing a crushing burden of debt – a debt that will soon surpass the size of the entire U. An Unsustainable Path The recent sovereign debt crises in Greece and other highly-indebted European countries provide a cautionary tale of the rough justice of the marketplace – lenders cannot and will not finance unsustainable deficits forever.4 Through its interventions into the economy. Some have even decided to purge their portfolios of U. and when they cut up the credit cards of profligate countries. Congress has all the fiscal powers necessary to command a change of course. House Budget Committee | April 5.S.com/id/ 41990901/ (accessed March 31. By contrast. and these purchases have helped keep interest rates low. But it must find the will to change.S. The lenders who buy much of the federal government’s debt have noticed the disconnect between the government’s perilous fiscal situation and the low rates of interest it is paying on the bonds that constitute the government’s loans. 2011 18 . This budget is offered in the hope that it might demonstrate the new House majority’s determination to face the government’s most difficult fiscal challenges.com. 2011). in order to ease concerns over the government’s creditworthiness and stave off an interest-rate spike. Americans have seen just how quickly a severe financial crisis can create widespread pain and chaos. and find it quickly. 4 “Pimco’s FIGURE 6 Biggest Fund Dumps Treasury Bond Holdings. severe economic turmoil ensues. America’s unsustainable budget path is no longer a problem that is far off in the future. Congress must show the market that it has a credible plan for getting the national debt under control.Yet decline is not inevitable. and others are advising their clients to do the same. nearly every fiscal expert and advisor in Washington has warned that a major debt crisis is inevitable if the U.

the President’s budget would keep the debt climbing as a share of the economy in the decade ahead. combined with the coming retirement of nearly 80 million baby boomers. House. But as interest rates rise from their current historically low levels and debt continues to mount. 5 Wolf. the U.S. “Are We Ready to Cut the U.Erskine Bowles. debt – meaning sharply higher interest rates. According to the non-partisan CBO. Testimony before the U. But the nation’s reliance on foreign creditors has increased dramatically over the past few decades. If foreign investors. interest payments are projected to consume over 20 percent of all tax revenue by 2020. University of Maryland economist Carmen Reinhart testified before the Budget Committee that 90 percent is often a trigger point for economic decline. Hearing. said it best: “The era of deficit denial is over. government’s ability to solve its most difficult fiscal challenges. government owes to others – will reach nearly 70 percent of the entire U. it would not be so alarming.usatoday. Interest rates – and the burden of paying interest on the debt – have nowhere to go but up. This makes the nation vulnerable to a sudden shift in foreign investor sentiment.S. Foreign flight It would be one thing if the U. debt. March 10. If interest rates increase by a higher-thanexpected amount in future – which appears to be more likely – then the nation’s interest payments could cost trillions of dollars more. begin to lose confidence in the U. That means that one in five tax dollars will be dedicated to making interest payments by the end of the decade – and that’s according to optimistic projections about interest rates. debt. particularly during a time of crisis.htm (accessed March 31. Interest payments are already consuming around 10 cents of every tax dollar. threaten to turn these recent deficit spikes into a permanent plunge into debt.S.” 5 Nearing a Debt Crisis Like a household or business.S. debt held by the public – money that the U. economy this year.S. 2010 http://www. government is able to borrow at historically low rates. Committee on the Budget. If this were merely a temporary rise in the debt. they will demand higher compensation to offset the perceived risk of holding U. Right now. Carmen M. the spending spree of the last two years. Reinhart.S.com/ printedition/news/20101129/1adeficit29_cv. from nearly 70 percent this year to over 87 percent of the U. November 29.S. However. partly because of the Fed’s interventions in the market. government owed most of this money to domestic lenders. Debt in excess of 60 percent of the economy is not sustainable for an extended period of time. economy by 2021. but also because the bonds of most foreign countries are looking even riskier. it is usually too late to avoid severe disruption and economic pain. That is bad news for the United States. 2011).S.S. By that measure. Deficit?” USA TODAY.6 How a Debt Crisis Would Unfold Spiraling interest rates The first sign that a debt crisis has arrived is that bond investors lose confidence in a government’s ability to pay its debts – and by that point. 2011 19 6 .S.S. Neither of these conditions is going to last. the Democratic co-chairman of the Commission on Fiscal Responsibility and Reform. especially foreign governments such as China. a nation’s indebtedness is best understood in terms of how much it owes relative to how much it makes.art. House Budget Committee | April 5. Lifting the Crushing Burden of Debt. 2011. Foreigners now own roughly half of all publicly held U. Richard. a sharp increase from a generation ago when foreigners owned just 5 percent of U.

Essentially.S. For starters. the nation would still be in for a long and grinding period of economic decline if it stays on its current path. the only solutions to a debt crisis would be truly painful: massive tax increases. foreign investors will re-evaluate the creditworthiness of the United States and demand higher interest rates. or all three. 2011 20 7 . government. If the Congress continues to put off difficult choices regarding the nation’s long-term problems. Real pain for families Warning signs in financial markets would merely be a harbinger of the real economic pain that would eventually be felt by American families in the event of a debt crisis. Reinhart. focusing on growth and inflation relative to past periods when this nation has experienced high debt levels.economics. The study found conclusive empirical evidence that total debt exceeding 90 percent of the economy has a significant negative effect on economic growth. and Kenneth S. The study found that not only is average economic growth dramatically lower when gross U. debt exceeds 90 percent of the economy. “Growth in a Time of Debt. It might even shock those who lived through the double-digit interest rates of the early 1980s. Even if high debt did not cause a crisis. Much higher interest rates on government debt would translate into much higher interest rates on mortgages. But these investment flows work both ways. sudden and disruptive cuts to vital programs. Rogoff. as the heavily indebted nations of Europe have recently learned.FIGURE 7 During the financial crisis. Absent a bailout. who have grown accustomed to borrowing in a climate of historically-low interest rates. These higher rates would most likely come as a shock to most Americans.harvard. A recent study completed by Reinhart and economist Ken Rogoff of Harvard confirms this common-sense conclusion.7 The study looked specifically at the United States. and this helped keep interest rates low. foreigners flocked to Treasury debt simply because other investments looked so unsafe by comparison. but inflation also becomes a problem.edu/ files/faculty/51_Growth_in_Time_Debt. http://www.S. credit cards and car loans. This would create a huge hole in the economy that would be exacerbated by panic. no entity on the planet is large enough to bail out the U. Carmen M.pdf House Budget Committee | April 5.” January 2010. the study confirmed that massive debts of the kind the nation is on track to accumulate are associated with “stagflation” – a toxic mix of economic stagnation and rising inflation. The Consequences of Inaction Stagflation The economic effects of a debt crisis on the United States would be far worse than what the nation experienced during the financial crisis of 2008. however. runaway inflation.

and U. The rise in interest rates would lead to lower business investment as companies would face a much higher hurdle for profitability on potential expansion plans. dollar is the world’s reserve currency.) would be slipping as consumer spending tailed off. considered to be safe and highly liquid assets by virtually all financial institutions worldwide. or roughly 120 percent of their total disposable income. According to the current level and composition of U. Harsh austerity As economic growth deteriorates. Treasury bonds are the lynchpin of global debt markets.Despite the increase in saving rates that has occurred in the wake of the financial crisis. Financial system breakdown The U. Monetizing the debt. 2011 21 . If the nation ultimately experiences a panicked run on its debt. The resulting panic would be orders of magnitude more disruptive than the financial crisis in 2008. demand for their products (particularly consumer durables bought on credit like cars. the government would have to slash spending and raise taxes to narrow its large fiscal gap. debt crisis would lead to sharp declines in the dollar and in the price of these bonds. government were forced to address such a situation by cutting domestic spending and raising taxes to close the budget gap. Real pain for businesses Higher borrowing costs would also serve as a serious impediment for businesses. If the U. As household borrowing costs spiked. meaning that a sudden increase in Treasury bond rates would lead to higher borrowing costs for consumers relatively quickly. the added interest costs for the typical family could easily exceed $1. household debt. and the inevitable result would be less business expansion and higher unemployment. which accounts for nearly 70 percent of the U.S. would soon lead to a destabilizing inflation. it will be forced to make immediate and painful fiscal adjustments (like the austerity program that has provoked riots in Greece). the Fed may also face rising pressure to step in and “monetize” the government’s debt – essentially printing money to buy up the public debt that private investors refuse to finance. this would mean punishing seniors twice.000 per year.S. households are still heavily indebted. and the global economy. meanwhile.S. Given that a serious debt crisis could lead to a sharp increase in Treasury rates. causing a deterioration of the balance sheets of large financial institutions. In such a crisis. hitting seniors the hardest. it becomes harder for the government to raise revenue through taxes. estimates suggest that an interest rate increase of just 1 percentage point would lead to over $400 in extra interest payments each year for the average family.S. Businesses would be doubly squeezed because. A large chunk of that total debt consists of home mortgages. This would wipe out the savings of millions of Americans. while the rest is in credit cards and other forms of debt. and tax rates would be raised across-the-board. economy.S.S. A U. U. without regard for the economic consequences. it would be compelled to do so indiscriminately. The consequences of these actions would be disastrous for the U. When combined with benefit cuts. etc. home furnishings. Add in higher taxes from a cash-strapped government trying to appease its creditors. would decline. The nation’s households still owe $13 trillion in private debt. as their funding costs were rising. growth in overall consumer spending.S. Facing the inability to borrow at a reasonable rate in the market. It turns out that roughly half of all that debt is in the form of variable interest rate loans. and a vicious cycle ensues. Promises to current retirees would be broken.S. House Budget Committee | April 5.

as well as difficulties with financing public debt.” Foreign Affairs. In just 16 years. All the… cases were marked by sharp imbalances between revenues and expenditures.” 8 America must not lose its role in the world. Ferguson. keep taxes low. Niall. yearly interest expenses will be double national defense spending. the United States will be unable to afford its role as an economic and military superpower. Last year in Foreign Affairs magazine. “Complexity and Collapse: Empires on the Edge of Chaos. Alarm bells should be ringing loudly… [for] the United States. For this and many other reasons. and confront these great challenges today to allow this generation to pass an even greater nation along to the next generation. Congress can choose to let this nation go the way of fallen empires. Other nations with very different interests will rush in to fill that role. debt is not just about dollars and cents. The new House majority was sent here by the American people to get spending under control.The Path to Decline In the end. House Budget Committee | April 5. financial historian Niall Ferguson surveyed some of the great empire declines throughout history and observed that “most imperial falls are associated with fiscal crises. If the nation stays on its current path. but also about America’s status as a world power and its freedom to act in its own best interests. March/ April 2010. Congress must act now to change the nation’s fiscal course. the debate about rising U. or it can begin – today – the work of restoring the vitality and greatness of America. If it stays on its current fiscal path. 2011 8 22 . interest payments on the national debt will begin to exceed yearly defense spending just 11 years from now.S.

with much of the money going to programs and projects the nation can do without. and equal opportunity for all under a limited constitutional government of popular consent. Changing Washington’s culture of spending: The budget process in Washington contains numerous structural flaws that bias the federal government toward ever-higher levels of spending. There is a vacuum of leadership in Washington. 1. liberty and the pursuit of happiness. too fast over the past decade. To do otherwise would consign the United States to a diminished future – a future that disrespects the sacrifices that generations of American families have made to secure the promise of this exceptional nation. American men and women in uniform are presently engaged with a fierce enemy and dealing with emerging threats around the world. and the current administration has offered no serious plan to address the sea of red ink. effective and responsible The role of the federal government is both vital and limited. open competition. it reflects the $178 billion in savings identified by Defense Secretary Robert Gates. addressing not only what Washington spends. Reform government to make it more efficient. GOVERNMENT When it comes to this generation’s defining challenge – the explosive growth of the national debt – the simple truth is that Washington has not been honest with the American people. across-the-board cuts in funding for national defense. $100 billion of which would be reinvested in higher combat priorities. This budget ends the taxpayer bailouts of failed financial institutions and stops Washington from picking the winners and losers across sectors of the economy. This budget offers a set of fundamental reforms to put the nation back on the right track. Ending corporate welfare: There is a growing and pernicious trend of government overreach into sectors of the private economy – a trend that stacks the deck in favor of entrenched interests and stifles growth. responsible energy exploration in the United States. and unlocks American energy production to help lower costs. This budget offers America a model of government guided by the timeless principles of the American Idea: free market democracy. It reduces the bureaucracy’s reach by applying private-sector realities to the federal government’s civilian workforce. 2011 23 . this budget rejects proposals to make deep. the federal government has strayed from these timeless principles. Streamlining other government agencies: Government spending on domestic departments and agencies has grown too much. Instead.S. And it repeals the government takeover of health care enacted last year and moves toward patient-centered reform. and reduce dependence on foreign oil. Providing for the common defense: Recognizing that the first job of government is to secure the safety and liberty of its citizens from threats at home and abroad. Boosting American energy resources: Too great a percentage of America’s vast natural resources remain locked behind bureaucratic barriers and red tape. This budget starts to restore spending discipline to a government that badly needs it by returning non-security discretionary spending to well below 2008 levels. This budget attempts to lead where others have fallen short. a robust private sector bound by rules of honesty and fairness. When government takes on too many tasks. This budget recommits the federal government to the security of every American citizen’s natural right to life. It targets hundreds of government programs that have outlived their usefulness. it usually doesn’t do any of them very well.A REFORM AGENDA FOR THE U. This budget locks in savings with enforceable spending caps and budget process reforms. but also how tax dollars are spent. ends Washington policies that drive up gas prices. It reflects an extension of the moratorium on earmarks. while fostering an environment for economic growth and private sector job creation. Limited government also means effective government. House Budget Committee | April 5. create jobs. a secure safety net. In certain key respects. The last Congress added trillions to the problem. This budget achieves savings in the category of national defense without jeopardizing preparedness or critical missions. This budget removes moratoriums on safe.

2. This budget heads off a crisis by forcing action from the President and both chambers of Congress to ensure the solvency of this critical program – creating the space for bipartisan solutions. The perverse incentives created by the corporate income tax do a lot of damage. House Budget Committee | April 5. Repairing a broken Medicaid system: Medicaid’s flawed financing structure has created rapidly rising costs that are nearly impossible to check. 4. This budget consolidates a complex maze of dozens of job-training programs into more accessible. 3. This budget extends those successes to other areas of the safety net to ensure that America’s safety net does not become a hammock that lulls able-bodied citizens into lives of complacency and dependency. and for future generations. The government must do a much better job of leveraging and targeting existing resources in this policy area. accountable career scholarships aimed at empowering American workers with the resources they need to pursue their dreams. In addition. food stamps and job training programs by providing states with greater flexibility to help recipients build self-sufficient futures for themselves and their families. which are. This budget embraces the widely acknowledged principles of pro-growth tax reform by proposing to consolidate tax brackets and lowers tax rates. When younger workers become eligible for Medicare. Advancing Social Security solutions: The risk to Social Security. enjoying the same kind of choices in their plans that members of Congress enjoy today. clearing out the burdensome tangle of loopholes that distort economic activity. This budget ends an onerous. These changes will not affect those in and near retirement in any way. Corporate tax reform: American businesses labor under the highest corporate income tax in the developed world. Individual tax reform: The current code for individuals is too complicated. This budget saves Medicare by fixing this flawed structure so that the program will be there for future generations. Targeting assistance to those in need: The welfare reformers of the 1990s were not able to extend their work beyond cash welfare to other means-tested programs. with a top rate of 25 percent. Reform the tax code to promote economic growth and job creation This budget recognizes that the nation’s fiscal health requires a vibrant. offering instead real security through real reforms. 2011 24 . Medicare will provide increased assistance for lower-income beneficiaries and those with greater health risks. is nearer at hand than most acknowledge. in turn. and innovate in the United States by lowering the corporate rate from 35 percent to a much more competitive 25 percent. Reform that empowers individuals — with a strengthened safety net for the poor and the sick — will guarantee that Medicare can fulfill the promise of health security for America’s seniors. who will receive the benefits they’ve organized their retirements around. Preparing the workforce for a 21st century economy: The government’s dozens of job-training programs suffer from overlapping responsibilities and too often lack accountability. who will inherit stronger programs they can count on when they retire. yet the tax itself raises relatively little revenue. This budget improves incentives for job creators to work. with high marginal rates that discourage growth. Reform government programs to fulfill the mission of health and retirement security This budget puts an end to empty promises from a broke government. Saving Medicare: A flaw in Medicare’s structure is driving up health care costs. It charts a prosperous path forward by reforming a tax code that is overly complex and unfair. they will be able to choose from a list of guaranteed coverage options. threatening to bankrupt the system – and ultimately the nation. Reform welfare to strengthen the social safety net This budget builds upon the historic progress of bipartisan welfare reform in the late 1990s. The framework established in this budget secures health and retirement benefit programs both for current beneficiaries. driven by demographic changes. Medicare would then provide a payment to subsidize the cost of the plan. invest. growing private sector. one-size-fits-all approach by converting the federal share of Medicaid spending into a block grant that gives states the flexibility to tailor their Medicaid programs to the needs of their unique populations. It strengthens Medicaid.

The Path to Prosperity charts a different course. confirmed by the evidence immediately before me. investors. our present and our future. a subtle destroyer of the human spirit… It is in violation of the traditions of America. House Budget Committee | April 5. or military threats from abroad. gradual moral-political decline as dependency and passivity weaken the nation’s character and as the power to make decisions is stripped from individuals and their elected representatives and given to non-elected bureaucracies. From the beginning. yet defined by great courage and achievement in monumental efforts. in the Senate and in the White House – now must take up the tools and start building the future Americans deserve. The elected representatives of the American people – in the House of Representatives. more prosperous and free America. and lenders that the new House majority recognizes the threat that unlimited government poses to the American way of life. The Path to Prosperity is the groundwork for a serious conversation about the future of this exceptional nation. Restoring limits to the size and scope of government is not a partisan issue. transform its government. economic depression. This generation’s defining moment has arrived. President Franklin Roosevelt – in words later repeated by President Ronald Reagan – warned of the threat to America’s national character from permanent dependency on government: The lessons of history. assuring this nation’s workers. worse. 2011 25 . and each generation has found strength in America’s highest principles and called forth its deepest virtues to make certain that the next generation inherited a stronger. This budget provides a plan for assuring that this generation upholds America’s historic legacy. America is drawing perilously close to a tipping point that has the potential to curtail free enterprise. our nation has been marked by hardship. and charts a new path to prosperity. Americans truly face a monumental choice – a choice that can no longer be avoided. Each generation has been tested. the nation’s crushing burden of debt jeopardizes this legacy. show conclusively that continued dependence upon relief induces a spiritual and moral disintegration fundamentally destructive to the national fiber. a budget is merely a blueprint for the actual work of statecraft.To dole out relief in this way is to administer a narcotic. savers.The Choice Throughout history. Today. rediscovers her abiding principles. and that it is determined to fulfill its commitments and responsibly restrain government’s growth. 1935. While an important statement of priorities. This generation must not be the first generation to fail – to break the link between our past. and weaken its national identity in ways that may not be reversible. In his State of the Union Address on January 4. Americans have selflessly tackled the difficult challenges before the republic. whether civil war. It marks a new federal commitment. In this we face two dangers: long-term economic decline as the number of makers diminishes and the number of takers grows and.

7 2021 19.3 1.0 17.5 3.745 -­‐379 2019 4.2 20.559 2.1 14.388 2012 3.9 18.5 16.6 2.7 2.671 3.533 -­‐995 2013 3.123 3.7 2019 19.586 3.939 -­‐414 2020 4.9 74.377 -­‐492 -­‐434 -­‐481 10.8 2013 21.1 6.2 17.9 18.4 4.9 1.230 -­‐1.6 67.7 17.860 -­‐699 FY2012  CHAIRMAN'S  MARK (NOMINAL  DOLLARS  IN  BILLIONS) 2014 2015 2016 2017 3.0 71.3 74.354 -­‐385 39.8 2.9 69.3 72.886 14.418 12.2 1.363 14.2 68.858 3.094 3.618 2.7 17.681 16.2 17.870 -­‐5.801 13.9 2.529 2.4 73.9 2.5 2017 20.5 AVERAGE 20.8 2012 22.217 12. 3.8 68.958 34.8 2020 19.8 70.800 15.8 17.142 -­‐402 2021 2012-­‐2021 4.544 4.7 2018 19.6 .352 3.5 17.254 15.0 1.a.237 3.071 10-­‐YEAR 2014 20.8 9.7 71.998 3.326 13.S-­‐1 2011 OUTLAYS REVENUES DEFICIT DEBT  HELD  BY  THE   PUBLIC AS  A  SHARE  OF  GDP 2011 OUTLAYS REVENUES DEFICIT DEBT  HELD  BY  THE   PUBLIC 24.739 4.088 n.589 -­‐408 2018 4.5 72.9 18.2 2015 2016 20.351 11.

812 -­‐4.938 FY2012  CHAIRMAN'S  MARK  VS.016 -­‐715 -­‐1.110 -­‐3.033 -­‐1.162 -­‐1.a. -­‐1.511 -­‐1.890 -­‐2.877 -­‐4.139 -­‐1.a.  PRESIDENT'S  BUDGET (NOMINAL  DOLLARS  IN  BILLIONS) 2011 OUTLAYS REVENUES DEFICIT DEBT  HELD  BY  THE   PUBLIC -­‐37 0 -­‐38 -­‐38 2012 -­‐179 -­‐11 -­‐169 -­‐243 2013 -­‐241 -­‐39 -­‐202 -­‐443 2014 -­‐390 -­‐118 -­‐272 2015 -­‐520 -­‐206 -­‐314 2016 -­‐618 -­‐258 -­‐360 2017 -­‐690 -­‐228 -­‐461 2018 -­‐773 -­‐249 -­‐524 2019 -­‐848 -­‐240 -­‐608 2020 -­‐240 -­‐699 2021 2012-­‐2021 -­‐6.S-­‐2 2011 OUTLAYS REVENUES DEFICIT DEBT  HELD  BY  THE   PUBLIC -­‐11 0 -­‐11 -­‐11 2012 -­‐110 -­‐25 -­‐86 -­‐98 2013 -­‐220 -­‐227 7 -­‐94 FY2012  CHAIRMAN'S  MARK  VS.214 -­‐1.735 .406 -­‐1.450 -­‐3. -­‐243 -­‐773 -­‐939 -­‐1.649 n.831 -­‐4.  CBO  BASELINE (NOMINAL  DOLLARS  IN  BILLIONS) 2014 -­‐368 -­‐346 -­‐21 -­‐118 2015 -­‐510 -­‐406 -­‐104 -­‐229 2016 -­‐602 -­‐448 -­‐154 -­‐396 2017 -­‐664 -­‐482 -­‐182 -­‐601 2018 -­‐733 -­‐527 -­‐206 -­‐840 2019 -­‐796 -­‐544 -­‐251 2020 -­‐869 -­‐561 -­‐308 2021 2012-­‐2021 -­‐941 -­‐597 -­‐344 -­‐5.382 n.

858 3.194 1.266 SOCIAL  SECURITY 489 410 373 309 270 279 264 242 267 268 269 OTHER  MANDATORY 212 256 318 387 448 507 558 600 634 666 687 NET  INTEREST 3.671 3.958 711 683 679 686 697 714 725 736 757 772 788 SECURITY   76 118 93 65 54 51 50 50 50 50 50 GLOBAL  WAR  ON   TERROR 565 482 435 416 404 396 395 396 402 410 422 NON-­‐SECURITY 275 259 262 248 243 252 263 265 280 291 305 MEDICAID 563 560 601 636 666 720 748 776 839 893 953 MEDICARE 0 0 0 0 0 0 0 0 0 0 0 PRESIDENT'S  HEALTH   CARE  LAW 727 760 799 841 888 939 995 1.739 TOTAL  OUTLAYS .058 1.392 0 9.352 4.618 3.586 3.123 4.124 1.667 7.159 2.559 3.998 4.544 4.S-­‐3 FY2012  CHAIRMAN'S  MARK  BY  MAJOR  CATEGORY (NOMINAL  DOLLARS  IN  BILLIONS) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2021-­‐2022 7.529 3.863 2.236 630 4.060 39.952 5.

016 .810 -­‐965 -­‐6.  PRESIDENT'S  FY2012  BUDGET  BY  MAJOR  CATEGORY (NOMINAL  DOLLARS  IN  BILLIONS) 2011 SECURITY GLOBAL  WAR  ON  TERROR NON-­‐SECURITY MEDICAID MEDICARE PRESIDENT'S  HEALTH  CARE  LAW SOCIAL  SECURITY OTHER  MANDATORY NET  INTEREST TOTAL  OUTLAYS 0 0 -­‐14 0 0 0 -­‐14 -­‐7 -­‐2 -­‐37 2012 0 0 -­‐72 -­‐1 -­‐12 -­‐6 0 -­‐85 -­‐4 -­‐179 2013 0 0 -­‐79 -­‐14 -­‐22 -­‐9 0 -­‐106 -­‐10 -­‐241 2014 0 0 -­‐78 -­‐44 -­‐25 -­‐66 0 -­‐155 -­‐22 -­‐390 2015 0 0 -­‐83 -­‐61 -­‐28 -­‐122 1 -­‐186 -­‐41 -­‐520 2016 0 0 -­‐90 -­‐69 -­‐32 -­‐164 1 -­‐199 -­‐64 -­‐618 2017 2018 2019 2020 0 0 -­‐95 -­‐77 -­‐38 -­‐182 1 -­‐205 -­‐93 -­‐690 0 0 0 0 0 0 2021 0 0 -­‐106 -­‐140 -­‐71 -­‐233 2 -­‐225 -­‐244 2021-­‐2022 0 0 -­‐923 -­‐735 -­‐389 -­‐1.403 0 -­‐715 -­‐446 -­‐5.812 -­‐733 -­‐796 -­‐869 FY2012  CHAIRMAN'S  MARK  VS.617 -­‐771 -­‐30 -­‐1.214 -­‐102 -­‐105 -­‐113 -­‐97 -­‐106 -­‐125 -­‐44 2 -­‐54 2 -­‐63 2 -­‐194 -­‐208 -­‐219 -­‐212 -­‐216 -­‐221 -­‐125 -­‐161 -­‐200 -­‐773 -­‐848 -­‐939 -­‐1.044 -­‐1.S-­‐4 2011 SECURITY GLOBAL  WAR  ON  TERROR NON-­‐SECURITY MEDICAID MEDICARE PRESIDENT'S  HEALTH  CARE  LAW SOCIAL  SECURITY OTHER  MANDATORY NET  INTEREST TOTAL  OUTLAYS 4 2 -­‐15 0 0 0 0 -­‐2 0 -­‐11 2012 28 -­‐10 -­‐79 -­‐1 0 -­‐6 0 -­‐42 -­‐1 -­‐110 FY2012  CHAIRMAN'S  MARK  VS.  CBO  BASELINE  BY  MAJOR  CATEGORY (NOMINAL  DOLLARS  IN  BILLIONS) 2013 25 -­‐58 -­‐117 -­‐13 1 -­‐9 0 -­‐46 -­‐4 -­‐220 2014 27 -­‐95 -­‐136 -­‐45 3 -­‐66 0 -­‐48 -­‐7 -­‐368 2015 27 -­‐111 -­‐152 -­‐63 4 -­‐122 0 -­‐78 -­‐15 -­‐510 2016 26 -­‐119 -­‐166 -­‐73 3 -­‐164 0 -­‐82 -­‐27 -­‐602 2017 2018 2019 2020 24 -­‐122 -­‐177 -­‐82 0 -­‐182 0 -­‐82 -­‐42 -­‐664 21 17 12 -­‐126 -­‐130 -­‐134 -­‐188 -­‐196 -­‐202 -­‐102 -­‐112 -­‐131 -­‐3 0 -­‐83 -­‐58 -­‐9 0 -­‐82 -­‐76 -­‐14 0 -­‐85 -­‐97 -­‐194 -­‐208 -­‐219 2021 8 -­‐138 -­‐204 -­‐150 -­‐17 -­‐233 0 -­‐87 -­‐119 -­‐941 2021-­‐2022 214 -­‐1.403 11 -­‐1.

S-­‐5 CHAIRMAN’S  MARK  VS  STATUS  QUO CBO  LONG-­‐TERM  ANALYSIS PROJECTED 2022 2030 19     20  ¾ -­‐1  ¾ 64 2040 19     18  ¾ ¼ 48 2050 19     14  ¾ 4  ¼ 10 CHAIRMAN'S  MARK TOTAL  REVENUES TOTAL  SPENDING DEFICIT  (-­‐)  OR  SURPLUS DEBT  HELD  BY  THE   PUBLIC TOTAL  REVENUES TOTAL  SPENDING DEFICIT  (-­‐)  OR  SURPLUS DEBT  HELD  BY  THE   PUBLIC 18  ½ 20  ¼ -­‐2 70 ALTERNATIVE  FISCAL  SCENARIO 19  ¼ 26  ¾ -­‐7  ½ 95 19  ¼ 32  ¼ -­‐13     146 19  ¼ 38  ½ -­‐19  ¼ 233 19  ¼ 45  ¼ -­‐26     344 .

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